Generating product decisions

ABSTRACT

The present invention relates to a system and method for generating business decisions. Embodiments of this system and method receive customer transaction data and additional information (cumulatively referred to as ‘modeling data’). This data is utilized to generate a product decision tree which models consumer purchasing decisions as a tree structure. The product decision tree may be utilized by the system to analyze demand for a given leaf (product) in association with other related products. In some embodiments, customers are segmented into groupings of customers who have similar attributes, including similar shopping behaviors. Customer insights are generated for the customer segments. The customer insights and the product decision tree are used to generate business plans, which may then be provided to a store for implementation. These plans may include a product assortment plan, an everyday pricing plan, a promotional plan, and a markdown plan.

CROSS REFERENCE TO RELATED APPLICATIONS

U.S. application Ser. No. 09/741,956 filed on Dec. 20, 2000, entitled “Econometric Engine”, is hereby fully incorporated by reference.

This is also a continuation-in-part of co-pending U.S. application Ser. No. 12/567,731 filed on Sep. 25, 2009, entitled “System and Methods for Analyzing Customer Segments”, which is hereby fully incorporated by reference.

BACKGROUND OF THE INVENTION

The present invention relates to a system and methods for a business tool for generating pricing and assortment decisions in a retail setting for the realization of a given business goal. This business tool may be stand alone, or may be integrated into a pricing optimization system to provide more effective pricing of products. More particularly, the present business product decision system may identify and categorize customers into segments based upon customer attributes and behaviors. From these generated segments, the system may generate product assortments and pricing and promotion decisions for the assortments in order to produce a desired result, such as market share expansion, profit maximization, consumer behavior manipulation or some combination.

For a business to properly and profitably function, there must be decisions made regarding product assortment, pricing and promotional activity which, over a sustained period, effectively generates more revenue than costs incurred. In order to reach a profitable condition, the business is always striving to increase revenue while reducing costs.

One such method to increase revenue is providing a desirable set of products and properly pricing these products or services being sold. Additionally, the use of promotions may generate increased sales which aid in the generation of revenue. Likewise, costs may be decreased by ensuring that only required inventory is shipped and stored. Also, reducing promotion activity reduces costs. Thus, in many instances, there is a balancing between a business activity's costs and the additional revenue generated by said activity. The key to a successful business is choosing the best activities which maximize the profits of the business.

Choosing these profit maximizing activities is not always a clear decision. There may be no readily identifiable result to a particular activity. Other times, the profit response to a particular promotion may be counter intuitive. Thus, generating systems and methods for identifying and generating business activities which achieves a desired business result is a prized and elusive goal.

Currently, there are numerous methods of generating product pricing through demand modeling and comparison pricing. In these known systems, product demand and elasticity may be modeled to project sales at a given price. The most advanced models include cross elasticity between sales of various products. While these methods of generating prices and promotions may be of great use to a particular business, there are a number of problems with these systems. Primarily, these methods of pricing are reactive to historical transaction data. While some effort is made to increase consumer purchasing, these systems are less able to drive particular purchasing behaviors. Additionally, these systems treat the consumer as an aggregate entity. There is little granularity within the consumer base, thereby limiting the specificity of business activities to a particular group of the consumer base.

Returning to the basic principles of sound business management, that being increasing revenue while reducing costs, by introducing specificity of the consumer base in the generation of business decisions a store may achieve more targeted (less cost) promotions which more effectively (increased revenue) influence the purchasing behaviors of the relevant consumers.

Moreover, most current price modeling systems generate pricing for a known set of products which have existing historical transaction data. Current systems have difficulty modeling new products. Further, these current systems are virtually useless in generating models for hypothetical product assortments.

It is therefore apparent that an urgent need exists for improved system for generating product decisions which is responsive to greater granularity of customer behavior as well as allowing for assortment modeling. This improved decision analysis enables highly targeted promotions and more effective promotional activity as well as product line manipulation. When coupled to a pricing optimization system, the decision system may generate more finely tuned pricing for given products. This business decision system provides businesses with an advanced competitive tool to greatly increase business profitability.

SUMMARY OF THE INVENTION

To achieve the foregoing and in accordance with the present invention, a system and method for generating business decisions is provided. In particular the system and methods segments customers using transaction history in order to aid in the optimization of prices, and further in order to aid in the generation of customer specific promotional activity.

One embodiment of the system for generating business decisions may be useful in association with a price optimization system. Embodiments of this system receive customer transaction data for the generation of product assortments and pricing. This customer transaction data includes, at a minimum, point of sales data. These point-of-sales records may be received as historical records or in real time. In addition to point of sales records, identification information for customers and product attribute data may be queried. The customer identification data may be received from the consumers directly, from third parties, collected information and public record information. All this data may be referred to as ‘modeling data’ in some embodiments of the invention.

In some embodiments, this modeling data may then be utilized by the system to generate a decision tree (also referred to as a product decision tree). The product decision tree models consumer purchasing decisions as a tree structure. In some embodiments, the decision tree may include a binary tree structure with individual products at each leaf. The decision tree may model any number of products, including fictitious products any of those not yet available within a given market. The product decision tree may be utilized by the system to analyze demand for a given leaf (product) in association with other related products.

Additionally, in some embodiments, customers may be segmented into discrete customer segments. Customer segments may include groupings of customers who have similar attributes and, in particular, similar shopping behaviors. From these customer segments may be generated ‘customer insights’. Examples of such insights may include shopping frequency, category penetration, shopping recency, aggregate spend, average purchase, average spend and categories shopped.

Then, in some embodiments, the system may utilize statistical demand modeling, customer insights and the product decision tree to generate one or more business plans, which may then be provided to a store for implementation. These plans may include a product assortment plan, an everyday pricing plan, a promotional plan, and a markdown plan.

In some embodiments, generating the product assortment plan includes an optimizing which products to carry in the at least one store. This optimization may utilize the received modeling data, as well as the decision tree to model demand for a given product as part of a product assortment.

In some embodiments, the everyday pricing plan may include generating optimal prices for a product assortment. These optimal prices are generated utilizing the received modeling data. Traditional demand modeling using Bayesian statistics or decision tree based demand modeling may be utilized in some embodiments to generate pricing schemes. Likewise, the promotional plan includes generating a promotion calendar for a product assortment. The promotional calendar generation may utilize the modeling data and at least one manufacturer condition. Lastly, in some embodiments, the markdown plan includes generating a markdown calendar for a product assortment. This markdown calendar generation utilizes the modeling data and at least one stock out goal.

Note that the various features of the present invention described above may be practiced alone or in combination. These and other features of the present invention will be described in more detail below in the detailed description of the invention and in conjunction with the following figures.

BRIEF DESCRIPTION OF THE DRAWINGS

In order that the present invention may be more clearly ascertained, some embodiments will now be described, by way of example, with reference to the accompanying drawings, in which:

FIG. 1 is a high level schematic view of an embodiment of a price optimization system with an integrated customer segment analyzer system;

FIG. 2 is high level flowchart of an optimization process;

FIG. 3 is a more detailed schematic view of the econometric engine;

FIG. 4 is a more detailed schematic view of the optimization engine and support tool;

FIG. 5 is a block diagram to illustrate some of the transaction costs that occur in retail businesses of a chain of stores;

FIG. 6 is a flowchart of some embodiment of the invention for providing an initial feasible solution;

FIGS. 7A and 7B illustrate a computer system, which forms part of a network and is suitable for implementing embodiments of the present invention;

FIG. 8 is a schematic illustration of an embodiment of the invention that functions over a network;

FIG. 9A is a graph of original profit from actual sales of the store using actual prices and optimal profit from optimized sales resulting from the calculated optimized prices bounded by its probability;

FIG. 9B is a graph of percentage increase in profit and the probability of obtaining at least that percentage increase in profit;

FIG. 10 is a flowchart depicting a process flow by which raw econometric data can be input, subject to “cleansing”, and used to create an initial dataset which can then be used to generate imputed econometric variables in accordance with some embodiment of the present invention;

FIG. 11 is a flowchart depicting a process flow depicting a process by which partially cleansed econometric data is subject to further error detection and correction in accordance with some embodiment of the present invention;

FIG. 12 is a flowchart depicting a process flow by which an imputed base price variable can be generated in accordance with one embodiment of the present invention;

FIG. 13 is a flowchart depicting a process flow by which an imputed relative price variable can be generated in accordance with one embodiment of the present invention;

FIG. 14A is a flowchart depicting a process flow by which an imputed base unit sales volume variable can be generated in accordance with one embodiment of the present invention;

FIG. 14B is a diagram used to illustrate the comparative effects of sales volume increase and price discounts;

FIG. 15A is a flowchart depicting a process flow by which supplementary error detection and correction is performed in accordance with an embodiment of the present invention;

FIG. 15B is a diagram used to illustrate the comparative effects of sales volume increase and price discounts;

FIG. 16 is a flowchart depicting a process flow by which an imputed stockpiling variable can be generated in accordance with an embodiment of the present invention;

FIG. 17 is a flowchart depicting a process flow by which an imputed day-of-week variable can be generated in accordance with an embodiment of the present invention;

FIG. 18 is a flowchart depicting a process flow by which an imputed seasonality variable can be generated in accordance with an embodiment of the present invention;

FIG. 19 is a flowchart depicting a process flow by which an imputed promotional effects variable can be generated in accordance with an embodiment of the present invention;

FIG. 20 is a flowchart depicting a process flow by which an imputed cross-elasticity variable can be generated in accordance with some embodiment of the present invention;

FIG. 21 is a more detailed schematic view of the customer segment analyzer;

FIG. 22 is a more detailed schematic view of the customer segment generator of the customer segment analyzer;

FIG. 23 is a more detailed schematic view of the data processor of the customer segment analyzer;

FIG. 24 is a more detailed schematic view of the segment specific promotion engine of the customer segment analyzer;

FIG. 25 is a flowchart depicting a process flow by which transaction data from the store(s) are analyzed for customer segments;

FIG. 26 is a flowchart depicting a process flow by which transaction log data is queried for customer segment analysis;

FIG. 27 is a flowchart depicting a process flow by which customers are grouped into customer segments;

FIG. 28 is a flowchart depicting a process flow for generating statistical segments for point of sales data for unknown parties;

FIG. 29 is a flowchart depicting a process flow for processing customer segment data;

FIG. 30 is a flowchart depicting a process flow for receiving desired optimization rules from stores;

FIG. 31 is a flowchart depicting a process flow for receiving customer segment optimization goals;

FIG. 32 is a flowchart depicting a process flow for analyzing customer segments for promotional activity;

FIG. 33 is a flowchart depicting a process flow for generating customer segment specific promotional activity;

FIG. 34 illustrates an example of a unit volume lift scatter plot chart for exemplary customer segments;

FIG. 35 illustrates an example of an average category lift bar chart for exemplary customer segments;

FIG. 36 illustrates an example of a unit volume lift chart for exemplary customer segments and multiple product categories;

FIG. 37 illustrates an example of a spend chart for exemplary customer segments and multiple product categories;

FIG. 38 is an example block diagram for a business decision system in accordance with some embodiments of the present invention;

FIG. 39 is an example block diagram for a decision engine of the business decision system in accordance with some embodiments of the present invention;

FIG. 40 is an example block diagram for an assortment planner of the decision engine in accordance with some embodiments of the present invention;

FIG. 41 is an example block diagram for an everyday price optimizer of the decision engine in accordance with some embodiments of the present invention;

FIG. 42 is an example block diagram for a promotion planning optimizer of the decision engine in accordance with some embodiments of the present invention;

FIG. 43 is an example block diagram for a markdown planning optimizer of the decision engine in accordance with some embodiments of the present invention;

FIG. 44 is an example illustration of a decision tree in accordance with some embodiments of the present invention;

FIG. 45 is an example flowchart for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 46 is an example flowchart for the receipt of additional information for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 47 is an example flowchart for the generation of customer segments for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 48 is an example flowchart for the generation of customer insights for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 49 is an example flowchart for the generation of customer dimensions for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 50 is an example flowchart for the generation of business plans for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 51 is an example flowchart for the generation of a product assortment plan for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 52 is an example flowchart for the generation of an everyday pricing plan for the generation of product decisions in accordance with some embodiments of the present invention;

FIG. 53 is an example flowchart for the generation of a promotion plan for the generation of product decisions in accordance with some embodiments of the present invention; and

FIG. 54 is an example flowchart for the generation of a markdown pricing plan for the generation of product decisions in accordance with some embodiments of the present invention.

DETAILED DESCRIPTION OF THE INVENTION

The present invention will now be described in detail with reference to several embodiments thereof as illustrated in the accompanying drawings. In the following description, numerous specific details are set forth in order to provide a thorough understanding of the present invention. It will be apparent, however, to one skilled in the art, that the present invention may be practiced without some or all of these specific details. In other instances, well known process steps and/or structures have not been described in detail in order to not unnecessarily obscure the present invention. The features and advantages of the present invention may be better understood with reference to the drawings and discussions that follow.

The present invention relates to a system and methods for a business tool for generating business decisions related to product assortments, pricing and promotions. These product decisions (business decisions) may utilize analyzed customer segments for increased granularity of plans. Additionally, the system may leverage decision trees to model hypothetical products and/or arbitrary product assortments. This business tool may be stand alone, or may be integrated into a pricing optimization system to provide more effective pricing of products. For example, the product assortment and customer segments may be incorporated into price optimization to modify elasticity variables to achieve a desired purchasing behavior in the target customer segment given a particular product set.

To facilitate discussion, FIGS. 1 and 2 show a customer segment analyzer coupled to an optimization system and methods for such a system. FIGS. 3-6 illustrate the optimization system and methods in more detail. General computer systems for the optimization system, customer segmentation system and business planning (decision) system may be seen at FIGS. 7 and 8. FIGS. 9 to 12 illustrate data error correction for optimization. FIGS. 13-20 show various pricing optimization processes.

FIGS. 21 to 24 detail the customer segment analyzer. Likewise, FIGS. 25 to 29 illustrate the method of generating customer segments and analyzing the segments. FIGS. 30 and 31 illustrate the methods for receiving and organizing optimization rules. FIGS. 32 and 33 illustrate the method for generating customer segment specific promotions. FIGS. 34 to 37 illustrate charts showing analysis of unit lift by customer segments.

FIGS. 38 to 43 detail the business planning system. FIG. 44 provides an example decision tree. FIGS. 45 to 54 provide methods for the generation of business plans and decisions.

Although useful for determining which grouping an individual, household or organization belongs to using external identification data and behavioral analysis the Customer Segment Analyzer 150 described below demonstrates particular utility for determining customer segments in a consumer setting. Additionally, when coupled to an optimization system as illustrated at FIG. 1, the Customer Segment Analyzer 150 may function as a particularly effective business tool.

Likewise, the Decision Engine Decision Engine 3820 may couple to the Optimization system 100, Customer Segment Analyzer 150 and a Customer Insight Generator Customer Insight Generator 3810 in order to provide enhanced business plans and product decisions including product assortments, pricing and promotions.

The following description of some embodiments of the present invention will be provided in relation to numerous subsections. The use of subsections, with headings, is intended to provide greater clarity and structure to the present invention. In no way are the subsections intended to limit or constrain the disclosure contained therein. Thus, disclosures in any one section are intended to apply to all other sections, as is applicable.

I. Optimization System Overview

To facilitate discussion, FIG. 1 is a schematic view of a Price Optimizing System for Business Planning 100. The Price Optimizing System for Business Planning 100 comprises an Econometric Engine 104, a Financial Model Engine 108, an Optimization Engine 112, a Support Tool 116, and a Customer Segment Analyzer 150. The Econometric Engine 104 is connected to the Optimization Engine 112, so that the output of the Econometric Engine 104 is an input of the Optimization Engine 112. The Financial Model Engine 108 is connected to the Optimization Engine 112, so that the output of the Financial Model Engine 108 is an input of the Optimization Engine 112. Likewise, the Customer Segment Analyzer 150 is connected to the Financial Model Engine 108 and the Econometric Engine 104, so that the output of the Customer Segment Analyzer 150 is an input of the Financial Model Engine 108 and the Econometric Engine 104. Although not presently illustrated, the Customer Segment Analyzer 150 may, in some embodiments, constitute a separate component from the remainder of the optimization system.

The Optimization Engine 112 is connected to the Support Tool 116 so that output of the Optimization Engine 112 is provided as input to the Support Tool 116 and output from the Support Tool 116 may be provided as input to the Optimization Engine 112. Likewise, both the Optimization Engine 112 and the Econometric Engine 104 are connected to the Customer Segment Analyzer 150 so that feedback from the Optimization Engine 112 and the Econometric Engine 104 is provided to the Customer Segment Analyzer 150. The Econometric Engine 104 may also exchange data with the Financial Model Engine 108.

Point of Sales (POS) Data 120 is provided from the Stores 124 to the Customer Segment Analyzer 150. Also, Third Party Data 122 may be utilized by the Customer Segment Analyzer 150 for the generation of customer insights and Segment Specific Promotion Activity 155.

FIG. 2 is a high level flowchart of a process 200 that utilizes the Price Optimizing System for Business Planning 100. The operation of the Price Optimizing System for Business Planning 100 will be discussed in general here and in more detail further below. Data 120 is provided from the Stores 124 to the Customer Segment Analyzer 150 for use in customer segment analysis (step 202). Generally, the data 120 provided to the Customer Segment Analyzer 150 may be point-of-sale information, product information, and store information. Additionally, the Customer Segment Analyzer 150 may receive data from third parties for generation of customer segments. Customer segment insights, generated segments and customer segment promotions may then be provided to the Econometric Engine 104 (step 204). The Econometric Engine 104 processes the analyzed data to provide demand coefficients 128 (step 208) for a set of algebraic equations that may be used to estimate demand (volume sold) given certain marketing conditions (i.e., a particular store in the chain), including a price point. The demand coefficients 128 are provided to the Optimization Engine 112 (step 212).

Additional processed data from the Econometric Engine 104 may also be provided to the Optimization Engine 112. The Financial Model Engine 108 may receive processed data from the Customer Segment Analyzer 150 (step 216) and processed data from the Econometric Engine 104. Data may also be received from the stores. This data is generally cost related data, such as average store labor rates, average distribution center labor rates, cost of capital, the average time it takes a cashier to scan an item (or unit) of product, how long it takes to stock a received unit of product and fixed cost data. The Financial Model Engine 108 may process all the received data to provide a variable cost and fixed cost for each unit of product in a store (step 220). The processing by the Econometric Engine 104 and the processing by the Financial Model Engine 108 may be done in parallel. Cost data 136 is provided from the Financial Model Engine 108 to the Optimization Engine 112 (step 224). The Optimization Engine 112 utilizes the demand coefficients 128 to create a demand equation. The optimization engine is able to forecast demand and cost for a set of prices to calculate net profit. The Stores 124 may use the Support Tool 116 to provide optimization rules to the Optimization Engine 112 (step 228).

The Optimization Engine 112 may use the demand equation, the variable and fixed costs, the rules, and retention data to compute an optimal set of prices that meet the rules (step 232). For example, if a rule specifies the maximization of profit, the optimization engine would find a set of prices that cause the largest difference between the total sales and the total cost of all products being measured. If a rule providing a promotion of one of the products by specifying a discounted price is provided, the optimization engine may provide a set of prices that allow for the promotion of the one product and the maximization of profit under that condition. In the specification and claims, the phrases “optimal set of prices” or “preferred set of prices” are defined as a set of computed prices for a set of products where the prices meet all of the rules. The rules normally include an optimization, such as optimizing profit or optimizing volume of sales of a product and constraints such as a limit in the variation of prices. The optimal (or preferred) set of prices is defined as prices that define a local optimum of an econometric model which lies within constraints specified by the rules When profit is maximized, it may be maximized for a sum of all measured products.

Such a maximization, may not maximize profit for each individual product, but may instead have an ultimate objective of maximizing total profit. The optimal (preferred) set of prices may be sent from the Optimization Engine 112 to the Support Tool 116 so that the Stores 124 may use the user interface of the Support Tool 116 to obtain the optimal set of prices. Other methods may be used to provide the optimal set of prices to the Stores 124. The price of the products in the Stores 124 are set to the optimal set of prices (step 236), so that a maximization of profit or another objective is achieved. An inquiry may then be made whether to continue the optimization (step 240).

Each component of the Price Optimizing System for Business Planning 100 will be discussed separately in more detail below.

II. Econometric Engine

FIG. 3 is a more detailed view of the Econometric Engine 104. The econometric engine comprises an Imputed Variable Generator 304 and a Coefficient Estimator 308. The data 120 from the Stores 124 is provided to the Imputed Variable Generator 304. The data 120 may be raw data generated from cash register data, which may be generated by scanners used at the cash registers. Additionally, processed customer segment data may be provided to the Imputed Variable Generator 304 from the Customer Segment Analyzer 150.

A. Imputed Variable Generator

The present invention provides methods, media, and systems for generating a plurality of imputed econometric variables. Such variables are useful in that they aid businesses in determining the effectiveness of a variety of sales strategies. In particular, such variables can be used to gauge the effects of various pricing or sales volume strategies.

FIG. 10 illustrates a flowchart 1000 which describes steps of a method embodiment for data cleansing imputed econometric variable generation in accordance with the principles of the present invention. The process, generally described in FIG. 10, begins by initial dataset creation and data cleaning (Steps 1011-1031). This data set information is then used to generate imputed econometric variables (Step 1033) which can be output to and for other applications (Step 1035). Likewise, such dataset correction and cleansing.

1. Initial Dataset Creation and Cleaning

The process of dataset creation and cleaning (that is to say the process of identifying incompatible data records and resolving the data incompatibility, also referred to herein as “error detection and correction”) begins by inputting raw econometric data (Step 1011). The raw econometric data is then subject to formatting and classifying by UPC designation (Step 1013). After formatting, the data is subject to an initial error detection and correction step (Step 1015). Once the econometric data has been corrected, the store information comprising part of the raw econometric data is used in defining a store data set hierarchy (Step 1017). This is followed by a second error detecting and correcting step (Step 1019). In some embodiments, this is followed by defining a group of products which will comprise a demand group (i.e., a group of highly substitutable products) and be used for generating attribute information (Step 1021). Based on the defined demand group, the attribute information is updated (Step 1023). The data is equivalized and the demand group is further classified in accordance with size parameters (Step 1025). The demand group information is subjected to a third error detection and correction step (Step 1027). The demand group information is then manipulated to facilitate decreased process time (Step 1029). The data is then subjected to a fourth error detection and correction step (Step 1031), which generates an initial cleansed dataset. Using this initial cleansed dataset, imputed econometric variables are generated (Step 1033). Optionally, these imputed econometric variables may be output to other systems for further processing and analysis (Step 1035).

While this exemplary process of generating an initial dataset with cleansing is provided with some degree of detail, it is understood that the process for predicting customer loss and customer retention strategy generation may be performed with a variety of optimization systems. This includes systems where, for example, demand groups are not generated, and where alternative methods of data set generation are employed.

The process begins by inputting raw econometric data (Step 1011). The raw econometric data is provided by a client. The raw econometric data includes a variety of product information, including, but not limited to, the store from which the data is collected, the time period over which the data is collected, a UPC (Universal Product Code) for the product, and provide a UPC description of the product. Also, the raw econometric data must include product cost (e.g., the wholesale cost to the store), number of units sold, and either unit revenue or unit price. Also, the general category of product or department identification is input. A category is defined as a set of substitutable or complementary products, for example, “Italian Foods”. Such categorization can be proscribed by the client, or defined by generally accepted product categories. Additionally, such categorization can be accomplished using look-up tables or computer generated product categories.

Also, a more complete product descriptor is generated using the product information described above and, for example, a UPC description of the product and/or a product description found in some other look-up table (Step 1013).

The data is then subjected to a first error detection and correction process (Step 1015). Typically, this step includes the removal of all duplicate records and the removal of all records having no match in the client supplied data (typically scanner data).

Data subsets concerning store hierarchy are defined (Step 1017). This means stores are identified and categorized into various useful subsets. These subsets can be used to provide information concerning, among other things, regional or location specific economic effects.

The data is then subjected to a second error detection and correction process (Step 1019). This step cleans out certain obviously defective records. Examples include, but are not limited to, records displaying negative prices, negative sales volume, or negative cost. Records exhibiting unusual price information, determined through standard deviation or cross store comparisons, are also removed.

This is followed by defining groups of products and their attributes and exporting this information to a supplementary file (e.g., a text file) (Step 1021). This product information can then be output into a separate process which can be used to define demand groups or product attributes. For example, this supplemental file can be input into a spreadsheet program (e.g., Excel®) which can use the product information to define “demand groups” (i.e., groups of highly substitutable products). Also, further product attribute information can be acquired and added to the supplementary file. In addition, updated demand group and attribute information can then be input as received (Step 1023). By maintaining a supplementary file containing large amounts of data, a more streamlined (abbreviated) dataset may be used in processing, thereby effectively speeding up processing time.

The data is further processed by defining an “equivalizing factor” for the products of each demand group in accordance with size and UOM parameters (Step 1025). This equivalizing factor can be provided by the client or imputed. An equivalizing factor can be imputed by using, for example, the median size for each UOM. Alternatively, some commonly used arbitrary value can be assigned. Once this information is gathered, all product prices and volume can be “equivalized”. Chiefly, the purpose of determining an equivalizing factor is to facilitate comparisons between different size products in a demand group.

The data is then subjected to a third error detection and correction process, which detects the effects of closed stores and certain other erroneous records (Step 1027). In accord with the principles of the invention, stores that demonstrate no product movement (product sales equal to zero) over a predetermined time period are treated as closed. Those stores and their records are dropped from the process. The third error detection and correction also includes analysis tools for detecting the presence of erroneous duplicate records. A further correction can be made for records having the same date and causal value but have differing prices or differing number of units sold.

After all the duplicate records eliminated, the data is reconstructed. The data can be reviewed again to insure all duplicates are removed. Optionally, an output file including all discrepancies can be produced. In the event that it becomes necessary, this output file can be used as a follow-up record for consulting with the client to confirm the accuracy of the error detection and correction process.

Additionally, reduced processing times may be achieved by reformatting the data (Step 1029). For example, groups of related low sales volume products (frequently high priced items) can optionally be aggregated as a single product and processed together. Additionally, the data may be split into conveniently sized data subsets defined by a store or groups of stores which are then processed together to shorten the processing times.

Next the process includes determining the nature of missing data records in a fourth error detection and correction step (Step 1031). The missing data records are analyzed again before finally outputting a cleansed initial dataset. For example, data collected over a modeled time interval is analyzed by introducing the data into a data grid divided into a set of time periods. For the time periods having no records, a determination must be made. Is the record missing because:

a. there were no sales of that product during that week (time period);

b. the product was sold out and no stock was present in the store during that time period (this situation is also referred to herein as a “stock-out’);

c. the absence of data is due to a processing error.

FIG. 11 depicts an exemplary process flow embodiment for determining the nature of missing data records in a fourth error detection and correction step in accordance with the principles of the present invention. The records are compared to a grid of time periods (Step 1101). The grid is reviewed for missing records with respect to a particular store and product (Step 1103). These missing records are then marked with a placeholder (Step 1105). Missing records at the “edges” of the dataset do not significantly affect the dataset and are deleted (Step 1107). Records for discontinued products or products recently introduced are dropped for those time periods where the product was not carried in the Store (Step 1109). The remaining dataset is processed to determine an average value for units (sold) and a STD for units (Step 1111). Each missing record is compared to the average units (Step 1113) and based on this comparison, a correction can be made (Step 1115).

The net result of execution of the process Steps 1011-1031 disclosed hereinabove is the generation of a cleansed initial dataset which can be used for its own purpose or input into other econometric processes. One such process is the generation of imputed econometric variables.

Note that other methods for addressing missing records may be utilized, as is well known by those skilled in the art. For example, missing records may be simply dropped. Alternatively, such records may be incorporated with additional information such as extrapolated values from before and/or after the data point, median values or other replacement value.

2. Generation of Imputed Econometric Variables

The foregoing steps (1011-1031) concern cleansing the raw econometric data to create an error detected and error corrected (“cleansed”) initial dataset. The cleansed initial dataset created in the foregoing steps can now be used to generate a variety of useful imputed econometric variables (Step 1033). These imputed econometric variables are useful in their own right and may also be output for use in further processing (Step 1035). One particularly useful application of the imputed econometric variables is that they can be input into an optimization engine which collects data input from a variety of sources and processes the data to provide very accurate economic modeling information.

A. Imputed Base Price

One imputed econometric variable that can be determined using the initial dataset created in accordance with the forgoing, is an imputed base price variable (or base price). FIG. 12 is a flowchart 1200 outlining one embodiment for determining the imputed base price variable. The process begins by providing the process 1200 with a “cleansed” initial dataset (Step 1201), for example, the initial dataset created as described in Steps 1011-1031 of FIG. 10. The initial dataset is examined over a defined time window (Step 1203). Defining a time window (Step 1203) includes choosing an amount of time which frames a selected data point allowing one to look forward and backward in time from the selected data point which lies at the midpoint in the time window. This is done for each data point in the dataset, with the time window being defined for each selected data point. The time frame can be user selected or computer selected.

The initial base price values generated above (Step 1205) provide satisfactory values for the imputed base price variable which may be output (Step 1207) and used for most purposes. However, optional Steps 1209-1217 describe an approach for generating a more refined imputed base price variable.

In generating a more refined imputed base price variable, the effect of promotional (or discount) pricing is addressed (Steps 1209-1217). This may be calculated by specifying a discount criteria (Step 1209); defining price steps (Step 1211); outputting an imputed base price variable and an imputed discount variable (Step 1213); analyzing the base price distribution (Step 1215); and outputting a refined base price variable (Step 1217).

Data records are evaluated over a series of time periods (e.g., weeks) and evaluated. The point is to identify price records which are discounted below a base price. By identifying these prices and not including them in a calculation of base price, the base price calculation will be more accurate. Therefore, a discount criterion is defined and input as a variable (Step 1209).

Further analysis is used to define base price “steps” (Step 1211). Base price data points are evaluated. Steps are roughly defined such that the base price data points lie within a small percent of distance from the step to which they are associated (e.g., 2%). This can be accomplished using, for example, a simple regression analysis such as is known to those having ordinary skill in the art. By defining the steps, the average value for base price over the step is determined. Also, price data points are averaged to determine the base price of step. Thus, the average of the base prices in a step is treated as the refined base price for that step.

Further refining includes an analysis of the first step. If the first step is short (along the time axis) and considerably lower than the next step, it is assumed that the first step is based on a discounted price point. As such, the value of the next step is treated as the base price for the time period of the first step.

At this point, absolute discount (ΔP) and base price (BP) are used to calculate percent discount (ΔP/BP) for each store product time period.

This base price is subjected to further analysis for accuracy using cross-store checking (Step 1215). This can be accomplished by analyzing the base price data for each product within a given store, and comparing with all other stores. Any outlier store's base price is adjusted for the analyzed product such that it lies closer to an average cross-store percentile for base price over all stores.

Thus, the forgoing process illustrates an embodiment for determining an imputed base price variable.

B. Imputed Relative Price Variable

Reference is now made to the flowchart 1300 of FIG. 13 which illustrates an embodiment for generating relative price variables in accordance with the principles of the present invention. A relative price may be calculated. As disclosed earlier, an equivalizing factor is defined. Using the equivalizing factor, an equivalent price can be calculated (Step 1301). Next equivalent units sold (“units”) can be calculated (Step 1303). In a similar vein, equivalent base price and equivalent base units are calculated (Step 1305) using the imputed values for base price (for example, as determined in Steps 1201-1207) and for base units (also referred to as base volume which is determined as disclosed below). For each Store, each demand group, and each date, the total equivalent units is determined (Step 1307). A weighted calculation of relative equivalent price is then made (Step 1309).

For example, such relative price value is determined as follows: equivalent price is divided by a weighted denominator, the weighted denominator is calculated by multiplying equivalent units for each product times the equivalent units sold. For each product, only the values of other products are used in the calculation. This means excluding the product being analyzed. For example, the relative price of A, given three exemplary products A, B and C, is determined as follows:

${rel}_{A} = \frac{{equiv} \cdot {priceofA}}{\left\lbrack \frac{{\left( {{equiv} \cdot {unitsofB}} \right)\left( {{Equiv} \cdot {priceofB}} \right)} + {\left( {{equiv} \cdot {unitsofC}} \right)\left( {{equiv} \cdot {priceofC}} \right)}}{{totalequivalentunits} - {equivalentunitsofA}} \right\rbrack}$

Also, a weighted average equivalent base price is calculated using the method disclosed hereinabove. The only difference being that instead of using the actual equivalent price, the calculated base price values per equivalent are used (Step 1311). Using the previously disclosed techniques, a moving average is generated for relative actual equivalent price and relative equivalent base price (Step 1313). Thus a variety of imputed relative price variables can be generated (e.g., relative equivalent price, relative equivalent base price, etc.).

C. Imputed Base Volume Variable

A flowchart 1400 shown in FIG. 14A illustrates one embodiment for generating an imputed base volume variable. Base volume refers to the volume of product units sold in the absence of discount pricing or other promotional effects. Base volume is also referred to herein as simply “base units”. The determination of base volume begins by receiving the cleansed initial dataset information for each product and store (Step 1401). The initial dataset information is processed to determine “non-promoted dates” (Step 1403), i.e. dates where the products are not significantly price discounted. Using the non-promoted data subset, an average value for “units” and a STD is calculated (i.e., an average value for product unit sales volume for each product during the non-promoted dates is calculated) (Step 1405). This value shall be referred to as the “non-promoted average units”. An initial value for base units (“initial base units”) is now determined (Step 1407).

This principle can be more readily understood with reference to FIG. 14B. The price behavior 1450 can be compared with sales behavior 1460. Typically, when the price drops below a certain level, sales volume increases. This can be seen at time periods 1470, 1471. In such a case, the actual units sold (more than usual) are not included in a base volume determination. Rather, those records are replaced with the average volume value for the non-promoted dates (the non-promoted average unit value, shown with the dotted lines 1480, 1481). However, where a sales volume increases during a period of negligible discount (e.g., less than 2%), such as shown for time period 1472, the actual units sold (actual sales volume) are used in the calculation of base volume. However, if the records show a sales volume increase 1472 which is too large (e.g., greater than 1.5 standard deviations from the non-promoted average unit value), it is assumed that some other factor besides price is influencing unit volume and the actual unit value is not used for initial base units but is replaced by the non-promoted average unit value.

A calculated base volume value is now determined (Step 1409). This is accomplished by defining a time window. For each store and product, the average value of “initial base units” is calculated for each time window. This value is referred to as “average base units”. This value is calculated for a series of time windows to generate a moving average of “average base units”. This moving average of the average base units over the modeled time interval is defined as the “base volume variable”.

D. Supplementary Error Detection and Correction

Based on previously determined discount information, supplementary error detection and correction may be used to correct price outliers. A flowchart 1500 illustrated in FIG. 15A shows one embodiment for accomplishing such supplementary error detection and correction. Such correction begins by receiving the cleansed initial dataset information for each product and store (Step 1501). In addition, the previously calculated discount information is also input, or alternatively, the discount information (e.g., ΔP/BP) can be calculated as needed. The initial dataset and discount information is processed to identify discounts higher than a preselected threshold (e.g., 60% discount) (Step 1503). For those time periods (e.g., weeks) having price discounts higher than the preselected threshold (e.g., greater than 60%), a comparison of actual units sold to calculated base volume units (as calculated above) is made (Step 1505). Corrected data is output (Step 1507).

The concepts are similar to that illustrated in FIG. 14B and may be more easily illustrated with reference to FIG. 15B. The principles of this aspect of the present invention are directed toward finding unexplained price aberrations. For example, referring to FIG. 15B, price discounts are depicted at data points 1550, 1551, 1552, and 1553. Also, corresponding sales increases are depicted by sales volume 1560 at data points 1561, 1562, and 1563. The data point 1550 has a discount greater than the threshold 1555 (e.g., 60%). So an analysis is made of data point 1550.

E. Determining Imputed Variables which Correct for the Effect of Consumer Stockpiling

With reference to FIG. 16, a flowchart 1600 illustrating a method embodiment for generating stockpiling variables is depicted. The pictured embodiment 1600 begins by defining the size of a “time bucket” (m), for example, the size (m) of the bucket can be measured in days (Step 1601). Additionally, the number (τ) of time buckets to be used is also defined (Step 1603). The total amount of time “bucketed” (m×τ) is calculated (Step 1605).

“Lag” variables which define the number of product units sold (“units”) in the time leading up to the analyzed date are defined (Step 1607). Then the total number of product units sold is calculated for each defined time bucket (Step 1609). Correction can be made at the “front end” of the modeled time interval.

If working near the front end of a dataset, units from previous weeks cannot always be defined and in their place an averaged value for bucket sum can be used (Step 1611). The idea is to detect and integrate the effects of consumer stockpiling on into a predictive sales model.

F. Day of the Week Analysis

With reference to FIG. 17, a flowchart 1700 illustrating one embodiment for determining a Day of the Week variable is shown. It is necessary to have data on a daily basis for a determination of Day of the Week effects. In accordance with the principles of the present invention, the embodiment begins by assigning the days of the week numerical values (Step 1701). Once categorized by day of the week, the product units (sold) are summed for a specified dimension or set of dimensions. Dimension as used herein means a specified input variable including, but not limited to, Product, Brand, Demand Group, Store, Region, Store Format, and other input variable which may yield useful information (Step 1703). For each Day of Week and each dimension specified, the average units (sold) are determined (Step 1705). For each date, a “relative daily volume” variable is also determined (Step 1707). This information may prove valuable to a client merchant and can comprise an input variable for other econometric models.

G. Imputed Seasonality Variable Generation

Another useful imputed variable is an imputed seasonality variable for determining seasonal variations in sales volume. Referring to FIG. 18, a flowchart 1800 illustrating one embodiment in accordance with the present invention for determining an imputed seasonality variable is shown. The process begins with categorizing the data into weekly data records, if necessary (Step 1801). Zero values and missing records are then compensated for (Step 1803). “Month” variables are then defined (Step 1805). A logarithm of base units is then taken (Step 1807). Linear regressions are performed on each “Month” (Step 1809). “Months” are averaged over a specified dimension (Step 1811). Indexes are averaged and converted back from log scale to original scale (Step 1813). The average of normalized estimates are calculated and used as Seasonality index (Step 1815). Individual holidays are estimated and exported as imputed seasonality variables (Step 1817).

H. Imputed Promotional Variable

Another useful variable is a variable which can predict promotional effects. FIG. 19 provides a flowchart illustrating an embodiment enabling the generation of imputed promotional variables in accordance with the principles of the present invention. Such a variable can be imputed using actual pricing information, actual product unit sales data, and calculated value for average base units (as calculated above). This leads to a calculation of an imputed promotional variable which takes into consideration the entire range of promotional effects.

Referring back to FIG. 19, the process begins by inputting the cleansed initial dataset and the calculated average base units information (Step 1901). A crude promotional variable is then determined (Step 1903). Such a crude promotional variable can be defined using promotion flags. A simple regression analysis, as is known to those having ordinary skill in the art, (e.g., a mixed effects regression) is run on sales volume to obtain a model for predicting sales volume (Step 1905). Using the model, a sample calculation of sales volume is performed (Step 1907). The results of the model are compared with the actual sales data to further refine the promotion flags (Step 1909). If the sales volume is underpredicted (by the model) by greater than some selected percentage (e.g., 30-50%), the promotion flag may be set to reflect the effects of a probable non-discount promotional effect. Since the remaining modeled results more closely approximate actual sales behavior, the promotion flags for those results are not reset (Step 1911). The newly defined promotion flags are incorporated into a new model for defining the imputed promotional variable.

I. Imputed Cross-Elasticity Variable

Another useful variable is a cross-elasticity variable. FIG. 20 depicts a flowchart 2000 which illustrates the generation of cross-elasticity variables in accordance with the principles of the present invention. The generation of an imputed cross-elasticity variable allows the analysis of the effects of a demand group on other demand groups within the same category. Here, a category describes a group of related demand groups which encompass highly substitutable products and complementary products. Typical examples of categories are, among many others, Italian foods, breakfast foods, or soft drinks.

The initial dataset information is input into the system (Step 2001). For each demand group, the total equivalent sales volume for each store is calculated for each time period (for purposes of this illustration the time period is a week) during the modeled time interval (Step 2003). For each week and each demand group, the average total equivalent sales volume for each store is calculated for each week over the modeled time interval (Step 2005). For each demand group, the relative equivalent sales volume for each store is calculated for each week (Step 2007). The relative demand group equivalent sales volume for the other demand groups is quantified and treated as a variable in the calculation of sales volume of the first demand group, thereby generating cross-elasticity variables (Step 2009).

The calculated imputed variables and data are outputted from the Imputed Variable Generator 304 to the Coefficient Estimator 308. Some of the imputed variables may also be provided to the Financial Model Engine 108.

B. Coefficient Estimator

The Coefficient Estimator 308 uses the imputed variables and data to estimate coefficients, which may be used in an equation to predict demand. In a preferred embodiment of the invention, sales for a demand group (S) is calculated and a market share (F) for a particular product is calculated, so that demand (D) for a particular product is estimated by D=S·F. A demand group is defined as a collection of highly substitutable products. In the preferred embodiments, the imputed variables and equations for sales (S) of a demand group and market share (F) are as follows:

1. Modeling Framework

The econometric modeling engine uses one or more of statistical techniques, including, but not limited to, linear and non-linear regressions, hierarchical regressions, mixed-effect models, Bayesian techniques incorporating priors, and machine learning techniques. Mixed-effect models are more robust with regards to missing or insufficient data. Further, mixed-effect models allows for a framework of sharing information across various subjects in the model, enabling better estimates. Bayesian techniques with prior information can incorporate all the features of the mixed effect models and, in addition, also enable for guiding the allowable values of the coefficients based upon existing information.

III. Financial Model Engine

The Financial Model Engine 108 receives data 132 from the Stores 124 and may receive imputed variables (such as baseline sales and baseline prices) and data from the Econometric Engine 104 to calculate fixed and variable costs for the sale of each item.

To facilitate understanding, FIG. 5 is an exemplary block diagram to illustrate some of the transaction costs that occur in retail businesses of a chain of stores. The chain of stores may have a headquarters 504, distribution centers 508, and stores 512. The headquarters 504 may place an order 516 to a manufacturer 520 for goods supplied by the manufacturer 520, which generates an order placement cost. The manufacturer 520 may ship the goods to one of the distribution centers 508. The receiving of the goods by the distribution center 508 generates a receiving cost 524, a cost for stocking the goods 528, and a cost for shipping the goods 532 to one of the stores 512. The store 512 receives the goods from one of the distribution centers 508 or from the manufacturer 520, which generates a receiving cost 536 and a cost for stocking the goods 540. When a customer purchases the item, the stores 512 incur a check-out cost 544.

The Financial Model Engine 108 should be flexible enough to provide a cost model for these different procedures. These different costs may have variable cost components where the cost of an item is a function of the amount of sales of the item and fixed cost components where the cost of an item is not a function of the amount of sales of the item. Financial Model Engine 108, thus, may generate a model that accounts for procurement costs in addition to the various costs associated with conducting business.

IV. Optimization Engine and Support Tool

FIG. 4 is a more detailed schematic view of the Optimization Engine 112 and the Support Tool 116. The Optimization Engine 112 comprises a rule tool 404 and a price calculator 408. The Support Tool 116 comprises a rule editor 412 and an output display 416.

In operation, the client (stores 124) may access the rule editor 412 of the Support Tool 116 and provides client defined rule parameters (step 228). If a client does not set a parameter for a particular rule, a default value is used. Some of the rule parameters set by the client may be constraints to the overall weighted price advance or decline, branding price rules, size pricing rules, unit pricing rules, line pricing rules, and cluster pricing rules. The client defined parameters for these rules are provided to the rule tool 404 of the Optimization Engine 112 from the rule editor 412 of the Support Tool 116. Within the rule tool 404, there may be other rules, which are not client defined, such as a group sales equation rule. The rule parameters are outputted from the rule tool 404 to the price calculator 408. The demand coefficients 128 and cost data 136 are also inputted into the price calculator 408. The client may also provide to the price calculator 408 through the Support Tool 116 a desired optimization scenario rules. Some examples of scenarios may be to optimize prices to provide the optimum profit, set one promotional price and the optimization of all remaining prices to optimize profit, or optimized prices to provide a specified volume of sales for a designated product and to optimize price. The price calculator 408 then calculates optimized prices. The price calculator 408 outputs the optimized prices to the output display 416 of the Support Tool 116, which allows the Stores 124 to receive the optimized pricing (step 232).

V. Customer Segment Analyzer

A. System Overview

FIG. 21 is a more detailed schematic view of the Customer Segment Analyzer 150. The Customer Segment Analyzer 150 may include a Master Database 2100 coupled to a Customer Segment Generator 2102. The Customer Segment Generator 2102 may likewise couple to a Data Processor 2104 and a Segment Specific Promotion Engine 2106. The Master Database 2100 may be populated with transaction history via POS Data 120. Likewise, the Master Database 2100 may include identity indexes for the transaction data. These identity indicators may be collected from various third parties such as credit card company identifiers, banking data, public registries and marketing databases. This identifier information may be received in the form of Third Party Data 122.

The POS data 120 may also be collected by the Customer Segment Generator 2102. The Customer Segment Generator 2102 may compare POS data 120 to historical data in the Master Database 2100. The Customer Segment Generator 2102 may then determine the identity of the household (or individual or organization) to which the POS data belongs. If the identity is able to be determined, the customers are grouped by demographic data and purchasing behaviors into customer segments. POS data, where the identity of the customer is not readily identifiable, may be segmented by purchasing behaviors alone.

The Customer Segment Generator 2102 may provide generated customer segments to the Data Processor 2104 for processing. The Data Processor 2104 may aggregate segmented POS data by household, validate the segment data and perform one or more data transformations on the segment data. Processed Data 2112 from the Data Processor 2104 may then be output to the Pricing Optimization System 100.

The Pricing Optimization System 100 may generate one or more Customer Segment Insights 2114 via the econometric engine and the optimization engine. The Customer Segment Insights 2114 may include information such as total spend by each customer segment, segment spend by product category and unit lift by segment. These Customer Segment Insights 2114 may then be provided to the Segment Specific Promotion Engine 2106.

The Segment Specific Promotion Engine 2106 may also receive the segment data from the Customer Segment Generator 2102. Segment data, along with Customer Segment Insights 2114 may be used to generate Segment Specific Promotion Activity 155.

Segment Specific Promotion Activity 155 may include targeted promotional mailers to particular segments, radio and television commercials on channels frequented by particular customer segments, promotions on particular products to appeal to particular customer segments, and other such promotional activity.

FIG. 22 is a more detailed schematic view of the Customer Segment Generator 2102 of the customer segment analyzer. The Customer Segment Generator 2102 is shown receiving POS Data 120. Also, the Customer Segment Generator 2102 couples to the Master Database 2100. The Master Database 2100 includes a plurality of datasets including Consumer Provided Data 2212, Third Party Provided Data 2214, Public Records 2216 and Generated Data 2218. Thus, the Master Database 2100 may be a series of separate databases, or may be a singular database with multiple logical datasets. All of the data included in the Master Database 2100 may be provided to a Data Error Detector 2202.

The Data Error Detector 2202, which is part of the Customer Segment Generator 2102, may undergo a data cleansing process, which includes identifying missing POS data, duplicate records and statistically unusual data. For example, in some embodiments, data which is beyond two standard deviations from the average measure for the particular data point may be flagged as an incorrect data. Also, identical data entries within a sufficiently short time period may be flagged as a duplicate record. Duplicate records may be deleted, while missing or erroneous records may be replaced by a prototypical record or deleted altogether. In yet other embodiments, POS data and database records may be cleansed in a manner similar to that of the process detailed in FIGS. 10 and 11. The cleansed data may then be provided to a Known ID Segment Grouper 2204 and a Statistical Segmenter 2206.

The Known ID Segment Grouper 2204 identifies and segments transaction data which has identity indicators. If identity is known, the Known ID Segment Grouper 2204 may look up the identity to determine if that customer has previously been assigned to a segment. If the customer has already been placed within a segment, the new transaction data may update the consumer's purchasing history. If the customer has not previously been assigned to a segment, the Known ID Segment Grouper 2204 may look up demographic, financial, geographic and additional data to determine appropriate customer segment. Also, purchasing behavior for the customer may be used to assign the customer to a segment.

On the other hand, if the transaction data does not include identity data, a Statistical Segmenter 2206 may statistically determine the customer that the particular transaction data belongs to. If the identity of the customer is not able to be statistically determined, then the transaction data may be treated as an unknown record. Unknown records may be grouped together in a segment comprised of only unknown records. In some other embodiments, the purchasing behavior of the unknown transaction record may be statistically analyzed for cues as to which segment the transaction record belongs.

A Segment Aggregator 2208 may receive each transaction record with a segment identifier from each of the Known ID Segment Grouper 2204 and the Statistical Segmenter 2206. The Segment Aggregator 2208 may then group these transaction records to generate discrete customer segments. This results in the generation of Segment Wide POS Data records 2220.

FIG. 23 is a more detailed schematic view of the Data Processor 2104 of the customer segment analyzer. The Data Processor 2104 may receive the Segment Wide POS Data records 2220. A Data Aggregator 2310 may then aggregate these records by household or other metric. Household, for the purposes of this disclosure, includes a grouping of individuals which purchase goods for common use or consumption. The aggregate records may then be validated by the Data Valuation Engine 2320. The validated records may then be processed by the Data Transformation Engine 2330 where the records are transformed. The resulting transformed records may then be output as Processed Data 2112 to the Pricing Optimization System 100.

FIG. 24 is a more detailed schematic view of the Segment Specific Promotion Engine 2106 of the customer segment analyzer. Customer Insights 2114 and Segment Wide POS Data records 2220 may be received by the Segment Specific Promotion Engine 2106 for processing. The Segment Specific Promotion Engine 2106 may include a Segment Margin Promotion Engine 2410, a Targeted Promotion Generator 2420 and a Cross Segment Promotion Generator 2430. The Segment Margin Promotion Engine 2410 may generate promotions which are aimed at the expansion of a target customer segment.

The Targeted Promotion Generator 2420 may generate targeted promotions suitable to optimize sales or profits for a given customer segment. Thus, the Targeted Promotion Generator 2420 may determine a sale on juice may maximize profits in a given segment. It may also be known that the given segment enjoys listening to light rock. Thus, advertisements for the juice sale may be played on radio stations which cater to the light rock genre. In this example, the targeted promotion costs less than a blanket commercial across all radio stations and still has a maximal impact upon sales. In some embodiments, multiple promotions may be generated simultaneously for different customer segments.

The Cross Segment Promotion Generator 2430 may generate promotions which stimulate cross segment purchases. Thus, consumers from a particular segment, which purchase a particular good, may be predicted to purchase other goods. Promotions, such as check out coupons, may be generated for these goods to incentivize further purchases and return shopping.

All of the outputs from the Segment Margin Promotion Engine 2410, the Targeted Promotion Generator 2420 and the Cross Segment Promotion Generator 2430 may be provided as Segment Specific Promotion Activity 155.

B. Customer Segment Analysis

i. Segment Generation

FIG. 25 is a flowchart depicting a process flow by which transaction data from the store(s) are analyzed for customer segments, shown generally at 202. The process begins from step 200 of FIG. 2. The process then progresses to step 2502 where Point of Sales (POS) data is received from one or more stores. POS data may be sent in real time over a network or may be received in batch files. The transaction log data found in the Master Database 2100 may then be queried for other segment or purchasing data associated with the customer the POS data is associated with, at step 2504. Additionally, segment behaviors may be queried at this step. The consumers associated with the POS data may then be segmented at step 2506.

Segment wide POS data may then be processed, at step 2508. Processing of the customer segmented POS data may include aggregation of data by household, validation of the data and transformation of the data.

Then, at step 2510, the processed data may be outputted to the optimization system for enhanced product pricing and the generation of customer segment insights. The process then concludes by progressing to step 204 of FIG. 2.

FIG. 26 is a flowchart depicting a process flow by which transaction log data is queried for customer segment analysis, shown generally at 2504. The process begins from step 2502 of FIG. 25. The process then progresses to step 2602 where consumer provided data is received. Consumer provided data may include membership information such as that collected for loyalty program registration. Additionally, survey, or other customer supplied information, may populate the received consumer provided data.

Then, at step 2604, third party data may be received. Third party data may include data from banks and other financial institutions, credit card information, public registries, mailing lists and other such data sources. Additionally, public records, such as governmental records, may be received at step 2606. Lastly, previously generated segment data that had been stored may be received at step 2608. All of the foregoing data may be utilized to tie an individual's identity to the transaction POS data. Additionally, socioeconomic, geographic and demographic data may be garnered for the individuals. The process then concludes by progressing to step 2506 of FIG. 25.

FIG. 27 is a flowchart depicting a process flow by which customers are grouped into customer segments, shown generally at 2506. The process begins from step 2504 of FIG. 25. The process then progresses to step 2702 where errors in the segment data are detected. Errors include duplicate records, missing records and records that are statistically improbable. Various known methods for dealing with said “erroneous” records may be employed, including deletion of the offending records, correction via statistical means, or replacement of records with prototypical data.

At step 2704, POS data belonging to known individuals may be assigned to the segment that the individual belongs to. This step may only be performed for individuals who have previously been placed within a segment. Effectively, all additional transaction data for that individual may then be added to the segment. Periodic checks for changing demographic or purchasing behavior may be made for these “known” individuals to ensure that they remain in the proper customer segment over time.

POS data which has identification data, but where the individual identified has not been previously placed within a customer segment, may be analyzed for a segment via demographic, socioeconomic and geographic indices. Additionally, purchasing behavior may be statistically related to a customer segment.

At step 2706, POS data for which there is no known identification may also be segmented. This segmentation may simply be assigning all POS data to an “unknown” segment comprised of only not identified transaction records. Alternatively, all these records may be simply ignored. In some other embodiments, however, the purchasing behavior may be compared to that of the individual segments via a figure of merit function or other statistical analysis. Thus, the POS data may be included in the segment which best mirrors the purchasing activity of the POS transaction.

At step 2708 the segmentation data for the known ID POS data and the unknown ID POS data may be aggregated by assigned segments to generate segment wide POS data. The process then concludes by progressing to step 2508 of FIG. 25.

FIG. 28 is a flowchart depicting the process flow for generating statistical segments for point of sales data for unknown parties, shown generally at 2706. The process begins from step 2704 of FIG. 27. The process then progresses to step 2802 where customers are segmented by like income and spend habits. At step 2804, customers may likewise be segmented by geo-demographics. Recency of shopping may be used to segment the customers as well, at step 2806. At step 2808, customers may be segmented by frequency of shopping. Also, at step 2810, customers may be segmented by the monetary value spent while shopping in the aggregate or on some particular reference goods. At step 2812, customers may be segmented by the number of product categories they shopped within. At step 2814, the customers may be segmented by an index as compared to the average consumer index, such as customer credit ratings or amount of money donated to charity annually.

Lastly, at step 2818, the system generates final customer segments by meshing the aforementioned generated segments. During this mesh, some of the generated segments may be ignored. Others may be combined into a single segment. Inconsistency in segments may be resolved by prioritizing the generated segments.

Also, during segment formation, the degree of customer “fit” to the given segment may be quantified (i.e., percentage value). This customer “fit” score to the given segment may be used during the mesh step to resolve inconsistent segment results. Additionally, in some embodiments, the consumer relevance of particular segments may be weighted, therefore further impacting the meshing step.

After all is said and done, a number of customer segments are generated. In some embodiments, a given customer may only be assigned to a given segment. In another embodiment, segments are not mutually exclusive, thus a given consumer may fit in any number of consumer segments (i.e., both “health conscious segment” and “new parent segment”). After the generation of consumer segments, the process then concludes by progressing to step 2708 of FIG. 27.

FIG. 29 is a flowchart depicting a process flow for processing customer segment data, shown generally at 2508. The process begins from step 2506 of FIG. 25. The process then progresses to step 2902 where the generated segment wide POS data is aggregated by household or other group (such as company, institution, club, or organization). This aggregation may be determined by cross referencing bank account information, loyalty card use, public records, commonality of shipment address, or other viable metric.

Then, at step 2904, the aggregated data may be validated, and lastly, at step 2906 the validated data may be transformed. After final data transformation, the process then concludes by progressing to step 2510 of FIG. 25.

ii. Optimization Rule Application

FIG. 30 is a flowchart depicting a process flow for receiving desired optimization rules from stores, shown generally at 228. The process begins from step 224 of FIG. 2. The process then progresses to step 3002 where overall optimization goals are received. An overall optimization goal may include the maximization of profit, maximization of sales while maintaining positive revenue above a particular level, and/or achieving a particular market share of one or more products. Additionally, more than one of these goals may be received. For example, one such combination of optimization goals could include a goal of gaining a 12% market share in electronics sales may be combined with a goal of otherwise maximizing profits.

Then, at step 3004 product segment optimization goals may be received. Product segment optimization goals may be similar to the overall optimization goals but affect a more granular level of product activity. Thus, an example of a product segment goal may include the sale of 1000 widgets a month, or setting the price of widgets below that of a particular competitor.

At step 3006, store specific optimization goals may be received. Store specific goals may come into play when particular circumstances warrant special treatment of a particular store or branch. For example, if a competitor is opening a new outlet near a particular store, an example store specific goal may be to reduce the price of nonessential goods in that specific store by 10% in order to retain business in light of the competitor.

Lastly, at step 3008, customer segment optimization goals may be received. An example of a customer segment goal may include optimizing sales within a given customer segment conditioned upon a measured effect on another segment. Another example of a customer segment goal would be the affect of a Consumer Price Index (CPI) for the customer segment. Another exemplary goal may include effecting profit/sales for a particular customer segment. Yet another example is impacting the price image perceived by a particular segment. Thus, through the careful setting of particular customer segment goals, consumer purchasing behavior may be manipulated on a relatively granular level.

After goals have been set, the process then concludes by progressing to step 232 of FIG. 2.

FIG. 31 is a flowchart depicting a process flow for receiving customer segment optimization goals, shown generally at 3008. The process begins from step 3006 of FIG. 30. As previously mentioned, customer segment goals may be received to guide price setting and promotional activity for particular products. Some examples of these goals were provided. In this exemplary flow process, particular goals are selected for the generation of customer specific optimization rules. At step 3102, for example, segment goals as to the profit or sales of a given consumer segment may be received. These segment goals may be subject to conditions of the effects upon one or more other segments. Thus, for example, price of product X may be increased to improve profits from Segment A but only to the extent that profits from Segments B and C are not reduced due to decreased sales.

At step 3104, price image, by customer segment, goals may be set. These goals may specify the customer segment for which product price image is to be improved. Again, like in segment goals subject to the effect on other consumer segments, the price image goals as perceived by some customer segment group may also be subject to effect conditions upon other segments.

Lastly, at step 3106, goals are received for achieving a Consumer Price Index (CPI) value for a particular consumer segment. The process then concludes by progressing to step 232 of FIG. 2.

iii. Segment Promotions

FIG. 32 is a flowchart depicting a process flow for analyzing customer segments for promotional activity, shown generally at 3200. The process begins at step 3202 where segment wide POS data is received. This consumer segment wide POS data was generated earlier, as previously discussed. Additionally, consumer insights generated by the econometric engine and optimization engine may be received at step 3204. Consumer insights may include unit volume lift data for products by customer segment. Together the consumer insights, along with segment wide POS data, may be used to generate segment specific promotion data at step 3206. The process then concludes.

FIG. 33 is a flowchart depicting a process flow for generating customer segment specific promotional activity, shown generally at 3206. The process begins from step 3204 of FIG. 32. As previously discussed, customer segment specific promotion data includes a wide range of activity. For example, ads may be tailored to appeal to particular customer segments (step 3302). Mailings to known individuals may be tailored to be of use to that customer dependent upon the segment they are identified as belonging to (step 3304). Ads directed to particular customer segments may be placed within media most likely to be consumed by individuals within that segment. Additionally, coupons at checkout may be provided to the customer. These coupons may provide discounts or other incentives for products that a consumer in that segment, with her recent purchase history, would be likely to use. Such activity may be referred to as cross segment analysis promotions (step 3306). Of course, additional promotions which depend upon customer segments may be generated and implemented.

C. Example Segment Insights

FIG. 34 illustrates an example of a unit volume lift scatter plot chart for exemplary customer segments, shown generally at 3400. In this scatter plot, the unit volume of categories of the products is illustrated on the X-axis. The percent volume lift in purchases by a given customer segment, given a 5% price reduction, is provided on the Y-axis. Thus, the Y-axis is a rough equivalent to the price sensitivity of that customer segment to a price change for the particular product category. Alternatively, this may be framed as illustrating the “importance” of the product to the consumer.

Likewise, total units sold, as illustrated by the X-axis directly effects revenue of the business. Thus these values are the “importance” of the product to the business. Of course, other matrices of “importance” may be utilized, such as profit produced by the product category.

This scatter plot enables a business to derive promotional activity. For example, product categories which are important to customers but less important to the business may be a good candidate for a promotion. Thus, for the given exemplary chart, the business may find discounting paper towels, tissue paper and diapers to be an effective strategy. However, reduction of dog food may be less of a desired activity since dog food promotions does not result in a large unit volume lift, and the reduction of revenues due to a lower price will be experienced on a large number of sales since regular unit volume is already very large.

FIG. 35 illustrates an example of an average category lift bar chart for exemplary customer segments, shown generally at 3500. This chart provides the consumer segments on the Y-axis and average category lift values along the X-axis for a given discount (here a 5% product discount). A percentage of category lift may also be provided. This type of chart may be generated for one or more categories of products. The presented example is for an average lift across all product categories. Thus, in this example, customer segment A has the most lift in shopping (11.6%) given a set discount. On the other hand, Segment X here has a marginal (9.6%) purchase volume lift given the set discount.

Using this plot, it may be determined that discounts and promotions which target customer Segment A may, in fact, result in greater returns than discounts targeting other segments. Additionally, by cross referencing the level of responsiveness to discounts by size of the customer segment (in total dollars spent), very effective business goals and promotions may be generated. For example, further assume that Segment A spends $1.5M per month on average, but segment C spends $4M per month on average. Although segment A appears more susceptible to promotional activity, a fixed advertisement cost, such as a billboard, may be better used as targeting individuals in Segment C as there is such a large difference in total spend. Thus, promotional algorithms may be devised which determines the optimal promotions. These promotional algorithms may include many variables, including: susceptibility to promotion, customer segment worth (by total spend, profit, volume, etc.) and promotion type.

FIG. 36 illustrates an example of a unit volume lift chart for exemplary customer segments and multiple product categories, shown generally at 3600. This chart provides more detail than the previous customer segment insight charts. Here the product categories are listed along the X-axis. Percent unit volume lift, given a set discount, is provided on the Y-axis. The segments are then illustrated by the lift in sales that occur for each product category.

Some product categories have very small lift spreads, such as canned vegetables on the present example. Thus, it may be deduced that an advertisement on canned vegetables is best placed in a medium where all consumers see the promotion. Other product categories, such as diapers and coffee, have much larger spreads in unit lifts. Thus, more targeted ads on these products may be desirable.

FIG. 37 illustrates an example of a spend chart for exemplary customer segments and multiple product categories, shown generally at 3700. In this example, spend per product category (Y-axis) is illustrated on a prototypical shopping trip by the consumer segment (X-axis). Total spend, as a percentage, is seen below the segment labels. Thus, in this example, Segment X is responsible for over 30% of total spend. But as seen in the previous examples, Segment X is also less susceptible to promotions than other segments. Thus, segment C, with a mere 13% of total spend, may be a better candidate for promotions than other segments given its relatively large susceptibility to promotions and somewhat larger contribution to total spend (as compared to Segments A, B, D and E at roughly 7% total spend).

Additionally, other useful information may be gained from this chart. For example, Segment X purchases significantly more dog food than any other customer segment. Thus, if a promotion is targeted at segment X it may be prudent to include dog food in the promotion. Likewise, as only Segment A and Segment X purchase any significant amount of diapers, if there is a promotion on diapers, these promotions should be directed at these two customer segments to be effective.

VI. Business Decision Generation

A. System Overview

FIG. 38 is an example block diagram for a Business Decision System 3800 in accordance with some embodiments of the present invention. The Business Decision System 3800 includes a variety of standalone functional modules including, but not limited to, the Optimization System 100, the Customer Segment Analyzer 150, a Customer Insight Generator 3810 and a Decision Engine 3820. The Optimization System 100 and the Customer Segment Analyzer 150 have been discussed in considerable detail earlier. The Customer Insight Generator 3810 may leverage information generated by the Customer Segment Analyzer 150 along with Additional Data 3802, Historical Data 3804 and Customer Data 3806 to generate insights into the customer segments. These insights have been discussed generally above and will be further explored in relation to the generation of effective business plans. The heart of the Business Decision System 3800 is the Decision Engine 3820 which utilizes information from each of the Optimization System 100, the Customer Segment Analyzer 150 and the Customer Insight Generator 3810 to generate Business Plan Data 3808. The Business Plan Data 3808 includes any of product assortments, impact reports on changes on product assortments, everyday pricing, promotional event plans and markdown plans.

Three data sources may be utilized by the Business Decision System 3800 in the generation of the Business Plan Data 3808. These include Additional Data 3802, Historical Data 3804 and Customer Data 3806. The Customer Data 3806 may, in some embodiments, be a functional equivalent of the aforementioned Master Database 2100. The Historical Data 3804 may include point-of-sales (POS) data or other transaction logs. The Additional Data 3802 may include a number of data resources including, but not limited to, store data, demographic data, promotional information, external segment information, focus group information, panel information and other relevant information.

Panel information is third party information which tracks shoppers across various retailers. This data provides a complete picture of a shopper's behavior. A typical retailer may lack some of this behavioral information since only transactions at the retailer are used in modeling the customer's behavior. Focus groups, on the other hand, may provide in depth feedback regarding a particular product or retailer.

As noted above, the Customer Segment Analyzer 150 may divide customers (as evidenced by transaction records) into a plurality of distinct customer segments. These segments are related by similar customer behavior, background or other attribute. From these customer segments, the Customer Insight Generator 3810 may generate insights particular to each segment. In some embodiments, the Customer Insight Generator 3810 may utilize the behavioral patterns of each customer segment to generate a map of a prototypical customer's decision making process. This map may be referred to as a decision tree in this application. In other embodiments, the Decision Engine 3820 may be responsible for generation of these decision trees.

Decision trees may be generated for any level of granularity as is desired given available computational resources. Thus, a general decision tree may be generated for the entire customer base, in some embodiments. Alternatively, decision trees may be made for each customer segment. Given large ticket items, relatively few customers and/or ample available computational resources, it is even possible to generate customized decision trees catered to each customer.

The Decision Engine 3820 may utilize decision trees, in conjunction with the demand modeling capabilities of the Optimization System 100 to generate accurate demand models for hypothetical product assortments. Thus, given a business goal (i.e., profit maximization, market share goal, or maximize revenue), the system may generate a product assortment best able to accomplish said goal. Likewise, changes to an existing product assortment may be modeled to determine how said change may affect overall business. Thus, a business may be able to accurately determine if the removal of a product or addition of a product is beneficial to the business.

Additionally, the Decision Engine 3820 in conjunction with the Optimization System 100 may generate preferred prices for a particular assortment of products. These preferred prices may be referred to as everyday prices. Short term promotional plans may also be generated by the Decision Engine 3820. Lastly, markdown schedules may be generated by the Decision Engine 3820. Any of these plans: Assortment, everyday prices, promotion and markdown, may be output by the Decision Engine 3820 as Business Plan Data 3808.

FIG. 39 is an example block diagram for the Decision Engine 3820 of the Business Decision System 3800. Here Segment Wide Transaction Data 2220 and Customer insights 2114 are being provided by the Customer Segment Analyzer 150 and Customer Insight Generator 3810, respectively. Although not presently illustrated, the Decision Engine 3820 may also leverage the processing capabilities of the Optimization System 100 in order to generate the Business Plan Data 3808.

The Decision Engine 3820 may include four application modules: an Assortment Planner 3910, an Everyday Price Optimizer 3920, a Promotion Planning Optimizer 3930 and a Markdown Planning Optimizer 3940. As discussed above, each of these functionality modules may generate a particular plan for implementation by a retailer. Each module may, in some embodiments, function independently from any other module. Thus, a particular retailer may be contractually obligated to carry a particular product assortment, but may determine price upon its stock. In this situation the Assortment Planner 3910 will not be utilized; however, the Everyday Price Optimizer 3920 may be utilized. Below each of the functional modules of the Decision Engine 3820 will be discussed in greater detail.

FIG. 40 is an example block diagram for the Assortment Planner 3910. Here the Segment Wide Transaction Data 2220 and Customer insights 2114 are being provided to a Decision Tree Generator 4010. The Decision Tree Generator 4010 may likewise receive transaction log data and product attribute data. The Decision Tree Generator 4010 may generate a decision tree from the received data. A decision tree, for purposes of this application, may provide a logical mapping of a customer's decision process when selecting which product to choose. In some embodiments, a decision tree may take the form of a binary heap data structure. Of course, other decision tree forms may be utilized. For example, instead of a binary tree, the decision tree may have any number of children under any particular parent node.

As noted above, it is possible that instead of generating a decision tree, the Assortment Planner 3910 may instead receive a pre-populated decision tree. This existing decision tree may be supplied by the retailer, a third party research group, a manufacturer or any other portion of the Business Decision System 3800. Ultimately the source of the decision tree is inconsequential as later processing is adaptable enough to use a variety of decision trees regardless of form or source.

The Assortment Planner 3910 may additionally include a Product Assortment Generator 4020 and an Assortment Demand Modeler 4030. The Product Assortment Generator 4020 and Assortment Demand Modeler 4030 may receive the generated (or received) decision tree and utilize the tree to generate either an Assortment Plan Data Assortment Data 4022 or Product Demand by Assortment 4032, respectively.

The Assortment Plan Data Assortment Data 4022 may include a plan for the entire assortment of products to be offered by the retailer to maximize a particular goal, or may include an impact report on the change to a particular product offering. Thus, for example, assume a retailer is approached by the manufacturer of a new product. The product may be analyzed by the Product Assortment Generator 4020 to determine what impact its inclusion in the store assortment will have on overall profit. Thus, a retailer may have an informed method of determining if the change to an assortment is desirable.

In another example, suppose a retailer operates a grocery chain and is looking to expand its business by opening a home and garden superstore. The product assortment for this new store may then be optimized to generate the most profit for this new store.

The Product Assortment Generator 4020 may generate these assortment decisions by identifying the distance between products in the decision tree. Thus, a new product may cannibalize products “close” to it in the decision tree. Likewise, products filling a “void” in the tree may be particularly well received without much cannibalism of sales for other products. Thus, a tree crawling algorithm or other relational algorithm may be utilized to determine how close any particular leaf (product) in the tree is to any other leaf. In a simplistic example, a simple stepwise function may be utilized to determine closeness of any particular product. Thus, sibling leafs in the tree may have two degrees of separation (child one to parent node, and from parent node to child two). More complicated measures are also possible, where leafs at different heights of the tree are considered further apart than products on the same tree level.

The Assortment Demand Modeler 4030 on the other hand, may estimate demand coefficients for new assortments of products for use in downstream pricing and promotion applications. These demand models may be assortment specific due to specific synergetic or cannibalistic effects between particular products.

FIG. 41 is an example block diagram for the Everyday Price Optimizer 3920. Again, the Segment Wide Transaction Data 2220 and Customer insights 2114 are being provided to a Segment Rule Engine 4110. Also, user input (not illustrated) may be provided to the Segment Rule Engine 4110. User input may include Boolean expressions or plain language rules. The Segment Rule Engine 4110 may generate logical rules from the user input. Thus, the Segment Rule Engine 4110 may, in some embodiment, behave as a functional equivalent of the support tool discussed above. The Segment Rule Engine 4110 may, however, additionally incorporate segment specific rules which adds granularity to the optimization. As discussed above, segment level rules may include limits on price changes experienced by members of a particular customer segment. Another example of segment level rules is increasing sales to some customer segment but not to other segments. This level of granularity enables the retailer to have greater control over customer behavior. Thus, the retailer is readily capable of promoting an image or furthering a particular goal.

The rules generated at the Segment Rule Engine 4110 may be provided to the Segment Optimizer 4130. Additionally an optimization goal may be provided from the Goal Selector 4120 to the Segment Optimizer 4130. The Goal Selector 4120 may have a default goal, in some embodiments, of maximizing profit. However, this goal may be configured dependent upon retailer needs or desires. For example, a retailer which has large reserves of cash may forego profit in exchange for increasing market share. Likewise, due to contractual overstock or manufacturer pressures, the retailer may opt to maximize sales instead of profits. The goal may include any of these, as well as, revenue maximization, adherence to competitors' prices or other overall goal.

The Segment Optimizer 4130 may apply the received goal and the rules to a particular assortment and Modeling Data 4150 to generate Everyday Prices 4140. This optimization may be performed utilizing many of the above disclosed statistical methods. In some embodiments, the Segment Optimizer 4130 may leverage the processing capabilities of the Optimization System 100 in order to generate the Everyday Prices 4140. In yet other embodiments, the Segment Optimizer 4130 may be replaced by the Optimization System 100 entirely.

FIG. 42 is an example block diagram for the Promotion Planning Optimizer 3930 of the Decision Engine 3820. Here a Promotion Rule Engine 4210 may receive Manufacturer Conditions 4250 as well as Segment Wide POS Data 2220 and Customer Insights 2114. Additionally, the Promotion Rule Engine 4210 may receive user input in the form of Boolean expressions or native language rules related to promotional requirements. The promotional rules are often product or brand specific. Often, promotions may be motivated by manufacturer incentives or rebates. In these cases, the manufacturer often attaches Manufacturer Conditions 4250 to the incentive. A common set of Manufacturer Conditions 4250 may include, for example, a rebate from Coke® of 25% provided that all Pepsi® products remain at MSRP during the promotional period.

The Promotion Rule Engine 4210 may transform the received conditions and user inputs into machine digestible logical promotional rules. These rules may then be provided to the Promotion Optimizer 4230 along with Modeling Data 4150 and Assortment Data 4022 to generate Promotion Activity 4240 for the given product assortment. Again, the Promotion Optimizer 4230 may leverage, or even be replaced, by the Optimization System 100.

FIG. 43 is an example block diagram for the Markdown Planning Optimizer 3940 of the Decision Engine 3820. The Markdown Rule Engine 4310 may, as with other rule engines, receive Segment Wide POS Data 2220 and Customer Insights 2114 as well as user inputs. The Markdown Rule Engine 4310 may generate markdown rules for consumption by the Markdown Optimizer 4330.

Markdown rules often identify a particular product subject to markdown as well as a sellout (stock out) timetable. Markdown may be in response to an expiration of a product (meat and produce must sell out within a set time limit) or due to other external pressures. For example, shelf space in a store is limited, thus if a retailer is expecting a large lot of a new product, there may be a need to sell out of existing inventory to make space for the new shipment. Lastly, markdown is particularly applicable to seasonal products. For example, after Easter has concluded, a retailer may wish to have an aggressive markdown on Easter paraphernalia.

The Markdown Optimizer 4330 may utilize these markdown rules, in conjunction with Modeling Data 4150 and Assortment Data 4022 to generate Markdown Activity 4340. Again the Markdown Optimizer 4330 may leverage, or even be replaced, by the Optimization System 100.

FIG. 44 is an example illustration of a decision tree, shown generally at 4400. This example decision tree is a heaped binary tree, as is well known in the art. This particular example decision tree may provide a model of how a typical consumer approaches the selection of a cereal at the point of decision making.

For many consumers, the first decision process is determining if a cereal purchase will be a kids' cereal or an adult cereal. The decision to purchase a kids' cereal may be further refined by a decision between sweetened cereal (Cocoa Puffs® for example) and unsweetened cereal (Cheerios® for example).

On the other hand, a customer purchasing an adult cereal may make the next decision between single grain cereals and multigrain cereals. If the customer wants a single grain cereal, the decision process may continue by choosing between sweetened cereals or unsweetened cereals.

The decision tree may be particularly useful in determining the impact on product assortments, and for modeling demand impact between products. Thus, for example, a retailer debating altering their product assortment by introducing a new adult single grain unsweetened cereal (let's call it Super Rice Nuggets) may determine the effect this change in assortment may have on overall business sales. Other single grain unsweetened cereals, such as shredded wheat, may experience reduced sales. Likewise, products close to the new product on the decision tree may also experience reduced sales, such as Special K®, a sweetened single grain adult cereal.

As distance from the new product increases in the decision tree, the impact of the product's inclusion in the assortment will decrease. Thus, for our example decision tree, the addition of Super Rice Nuggets will have diminishing effects on multigrain adult cereals, and very little impact on kids' cereals.

The impact a change in assortment has on other products may be further refined by referencing the demand coefficients between products in an existing assortment. Crowded product lines, such as cereals, may have large elasticities between products. Thus, a new cereal may have a greater effect on other cereal products than the addition of a new snack item has on other snack items (assuming the elasticities between snack items are less than between cereals).

Thus, the decision tree provides a large amount of utility to the system in the generation of assortment decisions and when modeling demand for products. Note that the provided decision tree has been dramatically simplified in the interest of clarity. Actual decision trees may include many more layers and/or branches. Other product attributes may be considered in these decision trees as well, such as product size, colors, flavors, brands and the like. Functional decision trees may include many thousands of products and hundreds if not thousands of decision nodes.

B. Methods for Business Decision Generation

FIG. 45 is an example flowchart for the generation of product decisions in accordance with some embodiments of the present invention, shown generally at 4500. The process begins at step 4502 where customer information is received. This Customer Data 3806 includes known customer identification information, third party data and customer segment data. Historical transaction data may also be received at step 4504. Historical transaction data may include point-of-sales (POS) data either directly or as transaction log reports. Additional information may be included in the transaction data, including product loss through theft, damage and/or expiration.

The process continues to step 4506 where additional information is received. Additional information may include, but is not limited to, store information, demographic information, promotional information, external product segment information, focus group information and panel information. Further discussion of the additional data received is provided below in reference to FIG. 46.

Customer segments may then be generated at step 4508. Generation of customer segments may occur in the manner discussed previously. This step may be completed by the Customer Segment Analyzer 150. As noted above, customer segments may be any groupings of customers (or in some cases purchasing groups such as corporations or households) which share some common attribute of purchasing behavior.

While considerable detail has been spent above discussing the generation of customer segments, the Business Decision System 3800 is versatile enough to operate with any breakdown of customer segments regardless of source. Thus, customer segments may be provided to the system from the retailer or manufacturer directly. In some alternate embodiments, customer segments may be provided from some external third party (such as a research contractor or retail association).

It should be noted that a number of additional sub-processes may be performed which are not illustrated in this example process for the sake of clarity. For example, in addition to the generation of customer segments, the business itself may be segmented to aid in demand modeling. Such segmentation, which is well known in the art, is not illustrated in the present example process. Such business segmentation may be along product, channel and activity lines. Also not illustrated are the processes for grouping products by demand groups, error correction on all received data, and generation of demand coefficients. All of these omitted sub-processes have been described in great detail above, and may be integrated into this example flowchart as is applicable.

Once customer segments have been received, the process may progress to step 4512 where customer insights are generated. As noted, customer insights may be generated through statistical analysis of transaction history trends. In addition to insights, customer dimensions may be generated at step 4514 using statistical analysis. Additionally, other customer information (provided by the customer or other third party) may be linked to the transaction data to generate the customer dimensions.

Once insights and dimensions are generated for the customer segments, the business plans may be generated at step 4516. This concludes the process. The generation of business plans, in relation to the present invention, includes any of assortment planning and price and promotion planning.

FIG. 46 is an example flowchart for the receipt of additional information for the generation of product decisions, shown generally at 4506. This process begins from step 4504 of FIG. 45. The process then progresses to step 4602 where store information is received. Store information may include any number of pertinent facts including, but not limited to: store location, store size, store condition, date since store remodel, parking availability of the store, store opening date, gross sales and customer base which the store services, among other pertinent information. Store data may be particularly useful in identifying stores best suited for particular promotion types and product line expansions. For example, a store located in an affluent area may be better suited to expanding a product assortment including luxury items.

Demographic information may also be provided, at step 4604. Demographic data may be compiled for the customers currently shopping at the retailer, as well as demographic data for potential customers. Thus, suppose a retailer in Los Angeles may cater to suburban Caucasian families. The demographic data for these customers is received. Additionally, it is noted that with minor adjustments to product assortments and advertising, it may be possible to expand the customer base to include much of the Latino population. This demographic data may also be received in order to aid in expansion of the viable customer base. Demographic data may include racial makeup, average household size, levels of disposable income, product/brand biases, median age, profession breakdown, etc.

Promotional information may also be received at step 4606. Promotional information may include any past promotional activity engaged in by the retailer, as well as the effect upon sales said promotions resulted in. Sales impact may be adjusted for seasonality factors, overall economy health, competitor activity, and unforeseen events. Adjusting the sales to account for these extraneous factors enables the system to generate causality variables for the promotional events which are not corrupted by other causal factors. For example, suppose a large advertising campaign is launched for a retailer based in Texas. Also assume that this campaign, through misfortune, coincides with a hurricane which disrupts business for a number of weeks. Raw sales data would seem to suggest that advertising campaigns injure sales for this retailer but, by adjusting these sales for regional economic declines due to the hurricane, a clearer picture emerges as to the effect of the promotion.

At step 4608, external segment information may be received. External segment information may refer to customer segments and/or business segments which are predetermined by the retailer or other external party. The retailer may have a segment breakdown which is being utilized for some other aspect of business planning and thus it may be beneficial to that retailer to utilize the same segment breakdown in generation of product assortments and pricing decisions. If external segments are received, the system may forego generation of its own segments.

Focus group information may be received at step 4612. Focus groups are collections of prototypical consumers presented promotional material and products. The reaction of these individuals to the provided products or promotions may then be analyzed and extrapolated to the larger consumer base. Thus, potential promotional activity can undergo a “test run” without risking large sums of capital on a potentially unsuccessful ad campaign. Likewise, product features, price, packaging and presentation may be tested before dedicating to a full scale production of the product. Focus group information may include survey data, as well as preference tests and reaction tests.

Likewise, panel information may be received at step 4614. Like focus group data, panel data involves following behaviors and reactions of small samples of consumers and extrapolating the analysis to the entire customer base. Panel data has the added benefit of taking a cross section of consumer sentiments across a range of retailers and consumer behaviors. Focus groups and consumer panels are both well known market research tools.

In addition to these sources of additional data, any number of other data sources may be accessed to aid the system in generation of product demand, customer insights and/or decision tree generation. For example, analyst reports, economic indicators and trade trends may be received in this process. The receipt of these additional data types is indicated by the dotted lines between steps 4612 and 4614. Generally speaking, the more relevant information available to the system, the better the behavioral modeling is. Thus, there is a basic balancing between cost of data gathering, computational resources and added accuracy to the modeling of consumer insights and product demand.

After all additional information has been received, the process may conclude by returning to step 4508 of FIG. 45.

FIG. 47 is an example flowchart for the generation of customer segments, shown generally at step 4508. This process begins from step 4506 of FIG. 45. Then at step 4702, transaction log data may be linked to known customers. If the customers have previously been identified as belonging to a particular customer segment, then all transaction log data belonging to these customers may likewise be assigned to these segments, respectively. Customers which have no historical segment, or transaction log data which cannot be associated with a given customer, may also be segmented by statistical analysis at step 4704. The sub-process for customer segmentation may then conclude by progressing to step 4512 of FIG. 45.

The methods for customer segmentation described here have been truncated in the sake of clarity. The more robust and detailed methods of customer segmentation described above in reference to the Customer Segment Analyzer 150 may be particularly useful in the generation of these customer segments. In addition, although not illustrated, the customer segments may be validated and transformed as is discussed above.

FIG. 48 is an example flowchart for the generation of customer insights, shown generally at 4512. Customer insights are segment wide statistical observations of segment behavior. This particular sub-process may begin from step 4508 of FIG. 45. Then, at step 4802, the frequency of shopping may be determined for each segment. Particularly, frequency may describe how often, on average, members of the segment shop at the retailer in a given amount of time. In general, the greater the segments frequency the more valuable the customer is to the retailer.

At step 4804, the process may determine the level of category penetration for each segment. Category, in this case, may refer to groupings of products (i.e., cookies and crackers). Thus, category penetration includes the breadth of categories the segments purchases from, and the relative quantities of products (by revenue volume) the segment purchases from each of these categories. In general, a segment which purchases from a narrow band of categories is a more “at risk” customer segment as they may be more readily lured to a competitor for these product purchases.

Another insight which may be determined is recency of purchases. This may be calculated at step 4806. Recency indicates how long it has been since the last purchase. Recency may be determined by segment on an average basis or for each customer. Recency has implications on the likelihood of a customer to discontinue shopping at the retailer. Thus, segments with large average recency (say 6 months) are very likely to be at risk for being lost customers. On the other hand, customer segments with a very short recency may be loyal repeat customers. Thus, promotions may be targeted at riskier segments in an attempt to retain as much of the customer base as possible.

Average purchase per trip may be calculated at step 4808. Generally, average purchase may be calculated as the number of items shopped for in an average shopping trip to the retailer. Large purchase numbers may indicate long shopping trips with opportunity for impulse purchases. Smaller purchase numbers indicate that the customer is more focused in her purchases. This consumer type has a preconceived notion of what the purchase will be and does not typically deviate from this purchase.

At step 4810, the process may determine the average spend by the segment at the retailer. Generally, average spend may be calculated as an aggregate dollar amount or a per trip dollar amount. In general, customers with high spend levels are considered more “valuable” to the business since the contribute more to the retailer's overall revenue. Spend levels may also be cross referenced with the segments net earnings in order to determine how much of the segment's income is spent at the retailer. This value may provide insight on the level of customer reliance and loyalty to the retailer.

The sub-process for customer segment insight generation may then conclude by progressing to step 4514 of FIG. 45.

The methods for segment insight generation described here have been truncated in the sake of clarity. Additional insights such as particular category purchases, trend curves, purchase times, and the like, are also readily determinable by the present invention. These additional insights are indicated as occurring between steps 4808 and 4810 by the dotted lines. Generally, the retailer may indicate insights desired. Alternately, particular insights may be calculated to generate particular business decisions.

FIG. 49 is an example flowchart for the generation of customer dimensions, shown generally at 4514. This particular sub-process may begin from step 4512 of FIG. 45. Then, at step 4902, the demographic data for each customer segment may be determined. Demographics may include race, age, income, disabilities, mobility (in terms of travel time to work or number of vehicles available), educational attainment, home ownership, and employment status, among other metricies.

Likewise, at step 4904 the geographical area of each segment may be determined. Demographics and geography of the segment population may be referred to as geo-demographics, as is well known by those skilled in the art. Geo-demographics for the segment population may be determined by cross referencing the customer's known billing addresses, shopping behaviors, and external third party information (such as census information and market research information). After determining the geo-demographic makeup of the customer segment, the sub-process for customer segment dimension generation may then conclude by progressing to step 4516 of FIG. 45.

The methods for segment dimension generation described here have been truncated in the sake of clarity. Additional dimensions such as political tendencies, national affiliations and demographic trends may also be calculated. These additional dimensions are indicated by the dotted lines between steps 4902 and 4904.

FIG. 50 is an example flowchart for the generation of business plans, shown generally at 4516. This sub process begins from step 4514 of FIG. 45, and constitutes the core of the business decision making process. The generation of business plans includes four main plan types, each of which will be discussed in more detail below. These include the generation of product assortment plans at step 5002, the generation of everyday pricing plans at step 5004, the generation of promotional plans at step 5006 and the generation of markdown plans at step 5008. In some embodiments, each of these respective plans may be generated on a routine basis for a retailer in order to maximize a business goal. Realistically, however, due to computational resource limitations, and the redundancy involved in continually generating optimized plans, it is often more desirable to have periodic plan generation based upon some plan schedule. Moreover, plan tuning techniques may likewise be utilized in between scheduled plan updates to keep plans current in an ever changing retail environment. Finally, trigger events, such as a dramatic shift in the economic activity, new competitors or unexpected events may be monitored for. These triggering events may then result in an update of the plan generation.

Furthermore, while all four planning processes are displayed at FIG. 50, in some embodiments it may be desirable to only engage in one plan generation. Thus, when a request from a manufacturer is received for a promotion event, it may be unnecessary to generate updated assortment and everyday pricing plans. Likewise, when a retailer is attempting to determine whether to introduce a new product line, the assortment plan for this new product may be generated independently from other business plans.

FIG. 51 is an example flowchart for the generation of a product assortment plan, shown generally at 5002. This sub-process begins by generating a product decision tree, as indicated by step 5102. This decision tree, as discussed previously, may provide a logical mapping of a consumer's decision choice, as it is made at the point of decision (typically in store before the product display). Such trees may include binary tree structures as is illustrated in the example decision tree provided at FIG. 44. Of course multi-nodal tree structures are also possible dependent upon the products considered and the method of decision making the consumer engages in.

Decision trees enable relationships between products, as viewed by a consumer picking the product, to be more accurately modeled. Thus, the impact of changes in assortment may be determinable by the location of the product being added or deleted within the decision tree. In general, adding products to the decision tree will negatively affect products close to it. At step 5104, these demand relationships between products and related products (cross elasticity) may be modeled based upon the product's location within the decision tree.

At step 5106, product assortments may be generated for a given business goal. The business goal is typically the maximization of sustainable profits; however, other goals such as market share goals, revenue goals and total sales volume goals are also considered, as previously discussed. The assortment plan may likewise be susceptible to conditions of assortment rules.

For example, a grocer may implement an assortment rule in which each product must have a particular minimum stock. Further the grocer may require that sodas fill only one aisle of the store. Lastly, the grocer may require that every soda carried be offered in bottle form as well as in cans. The goal in this example is profit maximization, and in this example further suppose the assortment best able to maximize profit includes a cola product by two brands, a clear soda product in two brands, a ginger ale, two varieties of root beer, a cream soda, a cherry soda and a grape soda. Also assume that the assortment is provided in order of contribution to the overall goal (profit generation). Here the actual assortment plan may require not including the cherry and grape soda varieties due to store space constraints. Thus, assortment rules may cause artificial restrictions upon product types, brands and quantities of products.

In addition to the generation of a total assortment, as in step 5106, the process may likewise generate more targeted decisions regarding limited changes to the assortment at step 5108. This decision process may be particularly helpful when a product assortment is already in place and the retailer is debating adding or subtracting one or more products from the preexisting assortment. Here the impact of such a change may be provided to the retailer in a report of assortment scenarios. This retailer feedback may include a simple yes/no answer on whether the assortment change is advisable, or may indicate more detailed effects upon the retailer's profitability, overall sales and sales of affected products. In some embodiments, the system may even suggest substitutions of products when a new product is being added and additional products which could be offered when an existing product in the assortment is being discontinued.

After assortment plans are generated, be they an entire assortment or a limited impact report, the sub-process may conclude by returning to step 5004 of FIG. 50.

FIG. 52 is an example flowchart for the generation of an everyday pricing plan, shown generally at 5004. This sub-process begins by generating a product decision tree, as indicated by step 5202. If a decision tree has been previously generated, this sub process may skip this step and merely recall the previously generated decision trees. Decision trees have been discussed in greater detail above. As noted, decision trees enable relationships between products, as viewed by a consumer picking the product, to be more accurately modeled. Thus, the impact of changes in assortment may be determinable by the location of the product being added or deleted within the decision tree.

After the decision tree has been generated or recalled, the process continues to step 5204 where a product assortment is received. The product assortment received may have been generated as discussed above as part of the assortment plan. However, any assortment may be utilized by the instant process including retailer mandated assortments.

Additionally, business goals and constraints may be received at step 5206. Business goals, as discussed above, may include any of maximizing profit, sales, volume and market share. Constraints include everyday pricing rules. These rules may include product specific rules, such as milk must cost within 3% of competitor's price. Likewise, pricing rules may be at a segment level granularity, such as maximize profits but keep the prices of products purchased by Segment Z below competitor's prices. Further, pricing rules may be global rules, such as prices cannot be increased above 10% their previous levels within a six month period.

Lastly, at step 5208, the everyday prices for products in the assortment may be generated. These prices may be generated in order to maximize the selected goal while remaining in compliance with the constraints (rules). This maximization may utilize the Bayesian statistical techniques described above, or any other statistical maximization algorithms.

Additionally, the system may be enabled to leverage demand relationships between products which are determined from the decision tree. Simple tree crawling methods may be utilized to determine relatedness of products on the tree. Alternatively, weighted measures between hierarchical levels may be utilized to determine demand relatedness (and hence cross elasticity) between products.

After the generation of everyday prices, the sub-process may end by returning to step 5006 of FIG. 50.

FIG. 53 is an example flowchart for the generation of a promotion plan, shown generally at 5006. This sub-process begins from step 5004 of FIG. 50. Then at step 5302 a product decision tree may be generate. Also, as noted previously, if a decision tree has been previously generated, this sub process may skip this step and merely recall the previously generated decision trees. Decision trees have been discussed in greater detail above.

After the decision tree has been generated or recalled, the process continues to step 5304, where a product assortment is received. The product assortment received may have been generated as discussed above as part of the assortment plan. However, any assortment may be utilized by the instant process including retailer mandated assortments.

Additionally, business goals and constraints may be received at step 5306. Business goals, as discussed above, may include any of maximizing profit, sales, volume and market share. Constraints include promotional rules. Thus, these rules may include promotional limitations (such as limitations to ad space), product limitations (such as only one brand of orange juice may be promoted at any one time), or pricing decisions (such as a maximum discount of 10%).

In addition to promotional rules which are typically set by the retailer, a set of manufacturer conditions may also be received at step 5308. Manufacturer conditions may be requirements a manufacturer places upon a promotion in order for the retailer to collect a manufacturer discount. Such conditions may include display requirements, non-promotion of competitor products and particular promotions being provided to the customers.

The process may then progress to step 5310 where a promotional plan, including a promotional calendar, is generated. This promotional plan may be responsive to the overall retailer goal, promotion rules and manufacturer conditions. Promotional plan generation may include a maximization of the goal, for various promotional vehicles including, but not limited to, advertisements, display enhancement, mailers, coupons, temporary price reductions or other such promotional methods. This maximization may utilize the Bayesian statistical techniques described above, or any other statistical maximization algorithms. The system may leverage demand relationships between products which are determined from the decision tree when modeling the impact of a particular promotion.

After the generation of the promotion plan, the sub-process may end by returning to step 5008 of FIG. 50.

FIG. 54 is an example flowchart for the generation of a markdown pricing plan, shown generally at 5008. This sub-process begins from step 5006 of FIG. 50. Then, at step 5402, a product decision tree may be generated. Also, as noted previously, if a decision tree has been previously generated, this sub process may skip this step and merely recall the previously generated decision trees. Decision trees have been discussed in greater detail above.

After the decision tree has been generated or recalled, the process continues to step 5404 where a product assortment is received. The product assortment received may have been generated as discussed above as part of the assortment plan. However, any assortment may be utilized by the instant process including retailer mandated assortments.

Additionally, business goals and constraints may be received at step 5406. Business goals, as discussed above, may include any of maximizing profit, sales, volume and market share. Constraints include markdown rules. These rules may include maximum markdown amounts (not below cost for example), maximum number of markdown products and time limit requirements for markdown.

In addition to markdown rules, a set of dates in which the particular products must be sold out by may be received at step 5408. These stock-out goals determine the aggressiveness of any particular markdown event. Finally, at step 5410, the markdown calendar may be generated. The markdown calendar includes a schedule of price decreases which ensures the products that have a stock out date sell out by this date while maximizing the business goals.

VII. System Platform

FIGS. 7A and 7B illustrate a computer system 900, which forms part of the network 10 and is suitable for implementing embodiments of the present invention. FIG. 7A shows one possible physical form of the computer system. Of course, the computer system may have many physical forms ranging from an integrated circuit, a printed circuit board, and a small handheld device up to a huge super computer. Computer system 900 includes a monitor 902, a display 904, a housing 906, a disk drive 908, a keyboard 910, and a mouse 912. Disk 914 is a computer-readable medium used to transfer data to and from computer system 900.

FIG. 7B is an example of a block diagram for computer system 900. Attached to system bus 920 are a wide variety of subsystems. Processor(s) 922 (also referred to as central processing units, or CPUs) are coupled to storage devices, including memory 924. Memory 924 includes random access memory (RAM) and read-only memory (ROM). As is well known in the art, ROM acts to transfer data and instructions uni-directionally to the CPU and RAM is used typically to transfer data and instructions in a bi-directional manner. Both of these types of memories may include any suitable of the computer-readable media described below. A fixed disk 926 is also coupled bi-directionally to CPU 922; it provides additional data storage capacity and may also include any of the computer-readable media described below. Fixed disk 926 may be used to store programs, data, and the like and is typically a secondary storage medium (such as a hard disk) that is slower than primary storage. It will be appreciated that the information retained within fixed disk 926 may, in appropriate cases, be incorporated in standard fashion as virtual memory in memory 924. Removable disk 914 may take the form of any of the computer-readable media described below.

CPU 922 is also coupled to a variety of input/output devices, such as display 904, keyboard 910, mouse 912 and speakers 930. In general, an input/output device may be any of: video displays, track balls, mice, keyboards, microphones, touch-sensitive displays, transducer card readers, magnetic or paper tape readers, tablets, styluses, voice or handwriting recognizers, biometrics readers, or other computers. CPU 922 optionally may be coupled to another computer or telecommunications network using network interface 940. With such a network interface, it is contemplated that the CPU might receive information from the network, or might output information to the network in the course of performing the above-described method steps. Furthermore, method embodiments of the present invention may execute solely upon CPU 922 or may execute over a network such as the Internet in conjunction with a remote CPU that shares a portion of the processing.

In addition, embodiments of the present invention further relate to computer storage products with a computer-readable medium that have computer code thereon for performing various computer-implemented operations. The media and computer code may be those specially designed and constructed for the purposes of the present invention, or they may be of the kind well known and available to those having skill in the computer software arts. Examples of computer-readable media include, but are not limited to: magnetic media such as hard disks, floppy disks, and magnetic tape; optical media such as CD-ROMs and holographic devices; magneto-optical media such as optical disks; and hardware devices that are specially configured to store and execute program code, such as application-specific integrated circuits (ASICs), programmable logic devices (PLDs) and ROM and RAM devices. Examples of computer code include machine code, such as produced by a compiler, and files containing higher level code that are executed by a computer using an interpreter.

FIG. 8 is a schematic illustration of an embodiment of the invention that functions over a computer network 800. The network 800 may be a local area network (LAN) or a wide area network (WAN). An example of a LAN is a private network used by a mid-sized company with a building complex. Publicly accessible WANs include the Internet, cellular telephone network, satellite systems and plain-old-telephone systems (POTS). Examples of private WANs include those used by multi-national corporations for their internal information system needs. The network 800 may also be a combination of private and/or public LANs and/or WANs. In such an embodiment, the Price Optimizing System for Business Planning 100 is connected to the network 800. The Stores 124 are also connected to the network 800. The Stores 124 are able to bi-directionally communicate with the Price Optimizing System for Business Planning 100 over the network 800. Additionally, in embodiments where the Customer Segment Analyzer 150 is not integrated within the pricing optimization system, the Stores 124 are likewise able to bi-directionally communicate with the Customer Segment Analyzer 150 over the network 800.

Additionally, in some embodiments, the system may be hosted on a web platform. A browser or similar web component may be used to access the likelihood of loss engine. By utilizing internet based services, retailers may be able to access the system from any location.

In the specification, examples of product are not intended to limit products covered by the claims. Products may for example include food, hardware, software, real estate, financial devices, intellectual property, raw material, and services. The products may be sold wholesale or retail, in a brick and mortar store or over the Internet, or through other sales methods.

In sum, the present invention provides a system and methods for generating business decisions regarding product assortment, everyday pricing, promotional activity and markdowns. The advantages of such a system include the ability to generate highly granular business decisions in an efficient and effective manner.

While this invention has been described in terms of several embodiments, there are alterations, modifications, permutations, and substitute equivalents, which fall within the scope of this invention. Although sub-section titles have been provided to aid in the description of the invention, these titles are merely illustrative and are not intended to limit the scope of the present invention.

It should also be noted that there are many alternative ways of implementing the methods and apparatuses of the present invention. It is therefore intended that thefollowing appended claims be interpreted as including all such alterations, modifications, permutations, and substitute equivalents as fall within the true spirit and scope of the present invention. 

What is claimed is:
 1. A computerized method for generating a business plan, useful in association with at least one store, the computerized method comprising: receiving modeling data, wherein the modeling data includes product data, customer data, constraints, and transaction data, and receiving the modeling data comprises: reformatting the modeling data by aggregating elements of the modeling data and processing the aggregated elements together as a single element to reduce a processing time of a processor; dividing customers into a plurality of customer segments; generating, by the processor, a product decision tree using the modeling data, wherein the product decision tree models prototypical consumer purchasing decisions for at least one of the customer segments as a tree structure, and wherein leaf nodes of the product decision tree correspond to products; computing, by the processor, the distance between leaf nodes of the product decision tree corresponding to at least two products to determine cannibalization effects between the at least two products; generating, by the processor, at least one business plan, wherein the at least one business plan is based upon the computed distance between leaf nodes and includes at least one of a product assortment plan, an everyday pricing plan, a promotional plan, and a markdown plan; and providing the at least one business plan to the at least one store for implementation.
 2. The computerized method as recited in claim 1, wherein the modeling data further includes store information, customer demographic information, past promotional information, external segment information, focus group information and panel information.
 3. The computerized method as recited in claim 1, wherein generating the product assortment plan includes an optimization of which products to carry in the at least one store, and wherein the optimization utilizes the received modeling data.
 4. The computerized method as recited in claim 1, wherein generating the everyday pricing plan includes generating optimal prices for a product assortment, and wherein the optimal prices are generated utilizing the received modeling data.
 5. The computerized method as recited in claim 1, wherein generating the promotional plan includes generating a promotion calendar for a product assortment, and wherein the promotion calendar generation utilizes the received modeling data and at least one manufacturer condition.
 6. The computerized method as recited in claim 1, wherein generating the markdown plan includes generating a markdown calendar for a product assortment, and wherein the markdown calendar generation utilizes the received modeling data and at least one stock out goal.
 7. The computerized method as recited in claim 3, further wherein generating the product assortment plan includes modeling demand of each product utilizing the product decision tree, and selecting a subset of the products which optimize consumer demand.
 8. A system for generating a business plan, useful in association with at least one store, the system comprising: at least one processor configured to: receive modeling data, wherein the modeling data includes product data, customer data, constraints, and transaction data, and receiving the modeling data comprises: reformatting the modeling data by aggregating elements of the modeling data and processing the aggregated elements together as a single element to reduce a processing time of the at least one processor; divide customers into a plurality of distinct customer segments; generate, by the at least one processor, a product decision tree using the modeling data, wherein the product decision tree models prototypical consumer purchasing decisions for at least one of the customer segments as a tree structure, and wherein leaf nodes of the product decision tree correspond to products; compute, by the at least one processor, the distance between leaf nodes of the product decision tree corresponding to at least two products to determine cannibalization effects between the at least two products; generate at least one business plan, wherein the at least one business plan is based upon the computed distance between leaf nodes and includes at least one of a product assortment plan, an everyday pricing plan, a promotional plan, and a markdown plan; and provide the at least one business plan to the at least one store for implementation.
 9. The system as recited in claim 8, wherein the modeling data further includes store information, customer demographic information, past promotional information, external segment information, focus group information and panel information.
 10. The system as recited in claim 8, wherein generating the product assortment plan includes an optimization of which products to carry in the at least one store, and wherein the optimization utilizes the received modeling data.
 11. The system as recited in claim 8, wherein generating the everyday pricing plan includes generating optimal prices for a product assortment, and wherein the optimal prices are generated utilizing the received modeling data.
 12. The system as recited in claim 8, wherein generating the promotional plan includes generating a promotion calendar for a product assortment, and wherein the promotion calendar generation utilizes the received modeling data and at least one manufacturer condition.
 13. The system as recited in claim 8, wherein generating the markdown plan includes generating a markdown calendar for a product assortment, and wherein the markdown calendar generation utilizes the received modeling data and at least one stock out goal.
 14. The system as recited in claim 10, further wherein generating the product assortment plan includes modeling demand of each product utilizing the product decision tree, and selecting a subset of the products which optimize consumer demand.
 15. A computer program product for generating a business plan, useful in association with at least one store, the computer program product comprising: a non-transitory computer readable storage medium having computer readable program code embodied therewith for execution on a processing system, the computer readable program code comprising computer readable program code configured to: receive modeling data, wherein the modeling data includes product data, customer data, constraints, and transaction data, and receiving the modeling data comprises: reformatting the modeling data by aggregating elements of the modeling data and processing the aggregated elements together as a single element to reduce a processing time of a processor; divide customers into a plurality of distinct customer segments; generate a product decision tree using the modeling data, wherein the product decision tree models prototypical consumer purchasing decisions for at least one of the customer segments as a tree structure, and wherein leaf nodes of the product decision tree correspond to products; compute the distance between leaf nodes of the product decision tree corresponding to at least two products to determine cannibalization effects between the at least two products; generate at least one business plan, wherein the at least one business plan is based upon the computed distance between leaf nodes and includes at least one of a product assortment plan, an everyday pricing plan, a promotional plan, and a markdown plan; and provide the at least one business plan to the at least one store for implementation.
 16. The computer program product as recited in claim 15, wherein the modeling data further includes store information, customer demographic information, past promotional information, external segment information, focus group information and panel information.
 17. The computer program product as recited in claim 15, wherein the computer readable program code configured to generate the product assortment plan includes an optimization of which products to carry in the at least one store, and wherein the optimization utilizes the received modeling data.
 18. The computer program product as recited in claim 15, wherein the computer readable program code configured to generate the everyday pricing plan includes computer readable program code configured to generate optimal prices for a product assortment, and wherein the optimal prices are generated utilizing the received modeling data.
 19. The computer program product as recited in claim 17, wherein the computer readable program code configured to generate the product assortment plan includes computer readable program code configured to model demand of each product utilizing the product decision tree, and select a subset of the products which optimize consumer demand.
 20. The computerized method as recited in claim 1, wherein receiving the modeling data comprises: exporting defined groups of products and attributes within the modeling data to a file and processing the file by separate processing to enhance a processing speed of the processor.
 21. The system as recited in claim 8, wherein receiving the modeling data comprises: exporting defined groups of products and attributes within the modeling data to a file and processing the file by separate processing to enhance a processing speed of the at least one processor.
 22. The computer program product as recited in claim 15, wherein receiving the modeling data comprises: exporting defined groups of products and attributes within the modeling data to a file and processing the file by separate processing to enhance a processing speed of the processor.
 23. The computer program product as recited in claim 15, wherein the computer readable program code configured to generate the promotional plan includes computer readable program code configured to generate a promotion calendar for a product assortment, and wherein the promotion calendar generation utilizes the received modeling data and at least one manufacturer condition.
 24. The computer program product as recited in claim 15, wherein the computer readable program code configured to generate the markdown plan includes computer readable program code configured to generate a markdown calendar for a product assortment, and wherein the markdown calendar generation utilizes the received modeling data and at least one stock out goal. 